Friday, October 18, 2013

Lack of Specialized Training Related to MBLs

In 2003, the Government Accountability Office forewarned that NCUA faced challenges ensuring that examiners have sufficient training to be adequately prepared for monitoring credit unions as they expanded more heavily into nontraditional credit union activities such as business lending.

However, NCUA did not appear to take this warning to heart in a timely fashion, as Chetco FCU's failure highlights.

According to Chetco's Material Loss Review, "there was a lack of understanding and specialized training for staff regarding the complexity surrounding the origination and monitoring of member business loans."

The report notes that the Examiner-in-Charge (EIC) did not receive any formal training with regard to evaluating business credits. The training records for the EIC involved in supervising Chetco from 2005 to 2011 going as far back as 1999 showed no specific training related to member business lending.

The Inspector General report recommended that "NCUA management ensure that during the Individual Development Plan process, supervisors perform a review of the training courses completed by examiners to ensure that the courses taken are in connection with their assigned responsibilities and to determine whether examiners have been exposed to the right mixture of course material...When critical changes occur in the industry or in the content of courses previously taken, examiners should consider re-taking those refreshed courses."

The report states that in 2010 NCUA created specialized positions to help provide more expertise in the lending area.

Regrettably, the agency belated recognized that it needed specialized personnel to exam credit unions that had moved into nontraditional activities.

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