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Tough oversight could have blunted NCUSIF impact
ALEXANDRIA, Va. (12/1/10)--The National Credit Union Administration’s (NCUA) Office of the Inspector General (OIG) has found that more aggressive NCUA supervisory actions could have helped the NCUA avoid the failure of nine credit unions and prevented the National Credit Union Share Insurance Fund from taking on substantial losses. The report focuses on significant findings from 10 of the NCUA OIG’s material loss reviews that were completed between November of 2008 and this October. The actions of the 10 individual credit unions reviewed, which included poor strategic planning and oversight, as well as outright fraud, “greatly contributed” to the failures, the OIG noted. The OIG identified examiner deficiencies in quality control efforts in the NCUA’s supervision of New London Security CU, High Desert FCU, and St. Paul Croatian FCU. The OIG also found that the NCUA used inadequate examination procedures during its inspections of these credit unions, as well as its inspections of Huron River Area CU, Center Valley FCU, Cal State 9 CU, Eastern Florida Financial CU, Clearstar Financial CU, and Ensign FCU. The report noted that the NCUA specifically failed to adequately monitor many lending programs and internal controls related to investment activity, and allowed fraud to continue to take place by ignoring several red flags that were present at some of the listed credit unions. Going forward, the OIG has recommended changes to the way that some CAMEL Code ratings are assigned and documented, and has suggested that the NCUA place a greater emphasis on Call Report monitoring. The NCUA should also emphasize the importance of reviewing asset concentrations, credit unions’ due diligence practices over new programs, services and third-party relationships, the OIG added. The report also encouraged the NCUA to review its requirements and levels that trigger quality control reviews, to provide national guidelines for the quality control process, and to require supervisory examiners to provide written response to the results of quality control review on any recommendations made by the quality control review. The NCUA agreed with the majority of the OIG’s recommendations, and said that it has either already implemented measures or is working on measures that would address some of the cited deficiencies. For the full NCUA OIG report, use the resource link.
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