Show Your Policies Some Love

Do you know which policies must be reviewed at least annually?

February 21, 2011

Recently I have been asked a lot of questions about policies, especially, “Which policies are we required to review annually?”

My first response, as always, is “it depends.”

Of course, the law requires credit unions to review certain policies annually. But many credit unions also include annual review as a policy statement within various sections of their manuals.

That said, let’s first cover the policies where annual review is required by regulation.

After perusing NCUA Rules and Regulations (no, I’m really not a compliance geek; there’s just nothing else to do in February in Iowa) I identified four areas where annual policy review is mandated:
1. 701.21- incentive bonus policies;
2. 703.3 – investment policies;
3. 723.5 – Member business loan policies; and
4. 748 – security program.

You’re probably thinking that doesn’t seem too bad. But then we turn to the concept of safety and soundness.

Chapter seven of the NCUA Examiners Guide (under “management”) states the following:

“The board must provide a clear framework within which the CEO can operate and administer the credit union’s affairs. This includes setting forth the credit union’s business strategy in the business plan, investment and loan policies, capital planning, funds management, and risk management.

The board must approve all major policies. Further, it should review and, if necessary, update those policies at least annually.”

These statements from the examiners guide are probably the catalyst behind some of your internal practice of reviewing certain policies annually—that is, if you remember putting that statement in the policy.

Here’s my suggestion, speaking as a former examiner: Put policy review on your monthly agendas. Don’t wait and try to review every policy in January or at that board meeting before the examiners arrive.

As regulations and services change, so should your policies.

Valentine’s Day has come and gone, but you still need to give your policies some love and be faithful to your policy maintenance and upkeep.

The strength of your policies is critical to your success in managing and controlling your risks, not to mention that it keeps your examiners happy. They may even love you for it, too.

JAMI WEEMS is senior compliance officer for PolicyWorks, Des Moines, Iowa, and a contributor to TheWorks, a compliance blog. Contact her at 866-518-0209.

PolicyWorks provides regulatory compliance solutions for credit unions and government and public affairs consulting. This article originally appeared as a blog entry on The Works. Visit our compliance page for regular updates to The Works.