Examiners Guide

The board of directors has the following four basic responsibilities:

• Select qualified management and evaluate management’s performance;

• Establish, regularly review, and revise as necessary business goals, standards, policies, and procedures;

• Review operating results and performance of new and existing activities; and

• Ensure compliance with applicable laws and regulations, and the credit union’s own policies and procedures.

While fulfilling these responsibilities, board members should:

• Operate independently from management;

To review credit union management, examiners may consider the following procedures:

• Review the credit union’s strategic and business plans and analyze management’s integration of risk management with planning and decision making;

• Review responsiveness to examination and audit suggestions and recommendations, and assess corrective actions taken to address risks identified in prior examinations and audits;

• Review the minutes of regular and special board and committee meetings for significant items;

NCUA reviewing management:

• Assess management’s ability to recognize, assess, monitor, and control risk

• Assess whether the credit union board of directors has sufficient expertise to adequately plan, direct, and control the operations of the credit union

• Determine whether the board and management adequately plan for future conditions and developments

• Determine whether the board is appropriately fulfilling its responsibilities and duties

Tables examiners use to determine respective risk for each of seven risk categories are located at this link:

http://www.ncua.gov/Legal/GuidesEtc/ExaminerGuide/chapter02.pdf

The examiner will assign a preliminary risk assessment for each of the seven risk categories: Credit, Interest Rate, Liquidity, Transaction, Compliance, Reputation, and Strategic. (The Risk-Focused Program chapter provides more information for identifying the seven risks.)

Quantitative data and any information the examiner has prior to conducting planning and scoping activities serve as determinants for this assessment. Information obtained through discussions with management and findings identified during the field work may change these preliminary assessments.

Scoping and Planning Objectives for Examiners

• Make a preliminary assessment of expected risk
• Determine appropriate planning activities
• Assess examination resource needs
• Evaluate information to assign a level of risk for each risk category
• Indicate anticipated direction of risks
• Determine appropriate examination steps and procedures

To review credit union management, examiners may consider the following procedures:

Management is responsible for identifying, monitoring, measuring and controlling (i.e., managing) the risks faced by the credit union. Their ability to manage these risks determine whether the credit union can correctly diagnose and respond to financial stress. Examiners should not assess management solely on the credit union’s current financial condition, nor should the management rating be only an average of the other component ratings.

Management affects all seven risks found in credit union operations – credit, interest rate, liquidity, transaction, compliance, strategic, and reputation. (The Risk-Focused Program chapter contains a description of the seven risks faced by credit unions.) This chapter will focus on the following risks:

After collecting, reviewing, and properly interpreting all appropriate data, the examiner arrives at conclusions. In this part of the total analysis process, the examiner identifies concerns, explains the causes, and assesses risk to arrive at a CAMEL rating. The examiner will determine the level (high, moderate, or low) of the overall strategic, interest rate, credit, liquidity, transaction, compliance, and reputation risks. The examiner will also evaluate the direction of these risks (increasing, unchanged, or declining).