Question: What is the expectation for compliance for credit unions?
The answer to this question requires some basic understanding about the FFIEC (the Federal Financial Institution Examination Council). The FFIEC home page has this to say about itself:
“The Federal Financial Institutions Examination Council (FFIEC) was established on March 10, 1979 and is a formal interagency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions by the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), and the Consumer Financial Protection Bureau (CFPB) and to make recommendations to promote uniformity in the supervision of financial institutions. To encourage the application of uniform examination principles and standards by the state and federal supervisory authorities, the Council established, in accordance with the requirement of the statute, an advisory State Liaison Committee composed of five representatives of state supervisory agencies in 2006.”
Largely due to FIRREA, many of the individual council members formed their own dedicated Compliance Examiners originally to focus on BSA. Given the increasing focus on regulatory compliance, these same examiners were tasked with reviewing the majority of regulations centered on consumer compliance. This has evolved over the years, including the removal of BSA from “Compliance,” but most of the agencies have issued separate examination guidelines and reports for “Compliance.” The NCUA remains an exception. Regulatory Compliance remains a section of the combined examination experience as Chapter 18 of the Examination Guidelines. From our perspective, the NCUA continues to emphasize compliance within its examinations, and examination personnel dedicated solely to this segment is emerging, but not yet full-blown.
Nonetheless, the NCUA has the full array of examination guidelines that are now covered by the CFPB and the FFIEC. Violations of those regulations by credit unions largely carry the same penalties as they do for banks. Moreover, we are seeing the increase in the use of Fair Lending Examinations (also covered by the FFIEC) for certain credit unions. There remains little question that the tide of expectation in regulatory compliance under any label is expanding in the credit union market.
The key today and in the future is matching the expectation to the credit union’s regulatory compliance risk profile. No two credit unions have the same regulatory risk profile, so each program should be specific. The establishment of a “compliance program,” whether formal or informal, is fast becoming the expectation.