NCUA's National Supervision Policy Manual

Many CUs believe documents of resolution have been used excessively in recent years.

June 1, 2013

NCUA continues to underscore to its examiners the appropriate use of Documents of Resolution (DORs), a key and oft en contentious part of the agency’s examination process.

NCUA spent two years on its new National Supervision Policy Manual (NSPM), an internal guide created to ensure examiners treat credit unions more uniformly throughout the agency’s five regions. Prior to the NSPM, examiners relied on individual regional supervision manuals and policies. The manual is used in conjunction with the NCUA Examiner’s Guide (which the agency says it’s updating in stages) and other agency directives to examiners, such as Supervisory Letters that the agency oft en publicly releases.

At its April 2012 examiner training conference, where NCUA unveiled the NSPM, the agency emphasized that examiners should only issue a DOR when there’s a material deficiency affecting safety and soundness. In early 2013, the agency indicated it would be conducting additional examiner training in the spring. That’s welcome news to the many credit unions who believe that DORs—the examiner’s conclusions on what areas of a credit union’s operations must change, and the timetable for taking action— have been used excessively in recent years.

Results of CUNA’s February 2013 Examination Survey show 43% of credit unions report that NCUA listed one or more DOR items in their most recent examination.

NCUA released a public version of the NSPM in November 2012 in response to CUNA’s request to help credit unions better understand examiner expectations. NCUA omitted certain sections of the manual, stating that making that information available might negatively impact its ability to supervise credit unions effectively.

The sidebar below summarizes NSPM’s 12 chapters. The contents of Chapter 4 on NCUA’s internal Quality Assurance Program and most of the appendices (which oft en contain sample documents) aren’t publicly disclosed.

The NSPM and DORs

Chapter 11 of the NSPM addresses administrative remedies and informal and formal actions.

Three pages in the manual address DORs, which are categorized as informal actions that don’t require the regional director’s approval. In contrast, the regional director must approve most other informal administrative actions brought by the agency, including non published Letters of Understanding and Agreement (LUA), and Preliminary Warning Letters. Formal actions include published LUAs, cease-and-desist orders, civil money penalties, involuntary liquidation or conservator ship orders, and removal and prohibition orders.

The NSPM includes instructions on DORs that say examiners will:

  • “Only identify material problems for problem code tracking purposes. For example, a single loan exception wouldn’t necessitate a comment as a problem area, but the absence of a sound loan policy would require a comment and be considered a problem area.”
  • “Work with credit union management to develop agreeable action plans. However, if officials don’t adopt the DOR or a specific corrective action plan at the exit meeting or joint conference, examiners will document the officials’ disagreement or inaction.” Examiners will “require credit union management to submit their action plan if they do not adopt the DOR.…If management’s action plan is insufficient to address the problem(s) and sufficient resolution isn’t obtained, elevated administrative actions will be used.”
  • “Require a written response to the DOR for credit unions rated a CAMEL 3, 4, or 5” within 30 calendar days.
  • “Ensure all prior examination DOR items are properly noted as resolved, unresolved, or no longer applicable, and appropriately documented” in AIRES [NCUA’s Automated Integrated Regulatory Examination System].

Unresolved DORs

The General Accountability Office’s (GAO) January 2012 report—“Earlier Actions Are Needed to Better Address Troubled Credit Unions”—listed several criticisms about NCUA’s failures to follow up and take appropriate supervisory action when a credit union doesn’t address DOR items.

NCUA communicated in its official response in late 2011 that its new NSPM would address these concerns. And the manual certainly does, stating the policies and procedures NSPM implemented would address the overall DOR follow-up process regardless of a credit union’s CAMEL rating. For instance, the manual notes examiners should consider whether to downgrade CAMEL 2 credit unions with continuing unresolved DORs.

The manual is very clear that examiners must act on unresolved DORs: “Failure to address previous DOR items are grounds for examiners to proceed with more stringent administrative action.” If such actions aren’t taken, then the examiner is expected to thoroughly explain in the Confidential section why elevated administrative enforcement actions weren’t taken.

So credit unions with DORs— regardless of their CAMEL rating— can expect increasing pressure from examiners to resolve issues identified in their exam report within the time frame stated in the DOR. And NCUA will expect credit unions to respond in writing if they fail to do so. NCUA’s policy states that “examiners must consider the quality of management and weigh management’s failure to resolve problems heavily in the management CAMEL component and overall composite rating.”

The NSPM doesn’t divulge a lot of secrets about the exam process, but your credit union might want to review the manual before your next examination. A state-chartered credit union might get a better idea of what NCUA views as its role in your exam process; a credit union service organization (CUSO) might better understand where NCUA believes it draws the line on its authority; and certainly any credit union experiencing problems will better anticipate how an examiner might react.

NANCY DEGRANDI is CUNA’s manager of federal compliance information and research


• CUNA’s eGuide to Federal Laws and Regulations:, select “compliance.” Visit the “examinations” topic, which provides a summary and a link to the NSPM along with results of CUNA’s February 2013 Examination Survey.