America’s Credit Unions Endorses Bill to Establish Independent Exam Office
Legislation would set up an independent appeals process for MSDs
America’s Credit Unions is throwing its support behind bipartisan House legislation that would establish an independent office to consider appeals of credit union and bank examinations.
In a Tuesday letter to the bill’s sponsors, Reps. French Hill, R-Ark., and David Scott, D-Ga., America’s Credit Unions President/CEO Jim Nussle wrote, “Your legislation will facilitate transparency and improve consistency in the examination process; provide a resource for financial institutions to express concern about their examination experience; and establish an independent adjudicatory process for the appeal of material supervisory determinations.”
The lawmakers introduced the measure, H.R. 8071, on April 18. The legislation would establish a new Office of Independent Examination Review within the Federal Financial Institutions Examination Council to consider appeals of “Materially Supervisory Determinations,” issues that could significantly affect the operation of a financial institution.
The bill also would require credit union and bank examiners to complete examinations no later than 60 days after the exam exit interview. If an examiner reports a “Materially Supervisory Determination,” the examiner would be required to share the documentation the examiner relied on in making that determination. The legislation would allow a financial institution to appeal that determination to the U.S. Circuit Court of Appeals.
The bill would apply to the National Credit Union Administration, the Consumer Financial Protection Bureau, the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.
“My legislation is a win for the banking industry and greatly increases the transparency and fairness in the bank examination process,” Hill said.
Scott said that the examination process is the first line of defense against threats to the safety and soundness of the financial system. “Unfortunately, in the event of a bank having deficiencies in their examinations, poor responsiveness can result in smaller community banks running the risk of going out of business,” he added.
Nussle said that the legislation seeks to address the concern that examiners, in some cases, are requiring credit unions to take action that is not required by law or regulation. In other cases, examiners are prohibiting credit unions from taking action that is permitted.
“By requiring examiners to provide the materials relied upon in making a MSD and establishing an independent appeals process, this bill introduces greater examiner accountability, transparency, and consistency,” Nussle wrote.
Nussle wrote that the trade group has one change it would like to see made to the bill. The legislation, as introduced, would divide the cost of the new Office of Independent Examination Review among the financial regulatory agencies.
“Although this may appear to be a logical distribution of operational costs, it is ultimately unfair as credit unions are generally smaller and less complex than banks, especially big banks,” he wrote. “Accordingly, their examinations— while equally as robust—may not require the same number of resources from the regulator.”
Nussle wrote that requiring the NCUA to share equally in the office’s costs “places an undue and disproportionate burden on the credit union industry, which funds the NCUA’s budget.”