Credit Union Exam Solutions Presents With Flying Colors

www.marktreichel.comhttps://www.linkedin.com/in/mark-treichel/Safety and soundness has been referred to in examinations from here to eternity, and until now nobody could tell you where it was defined. The FDIC and the OCC have finalized a rule that puts a definition on “unsafe or unsound practice” for the first time, for both enforcement actions under 12 USC 1818 and supervisory activities. NCUA did not join.Mark Treichel is joined by Steve Farrar and Todd Miller of Credit Union Exam Solutions to work through what the rule actually says, why it reads a great deal like a section buried in NCUA’s own National Supervision Policy Manual, and what credit unions should take from a rule that does not apply to them.Steve Farrar spent the first part of his NCUA career in the field, predominantly as a problem case officer working conservatorships, liquidations, and assisted mergers. He then spent fifteen years in the central office in the Division of Risk Management, training examiners in problem resolution and working on the enforcement manual and risk-based capital, and finished as a vice president of the Central Liquidity Facility. Todd Miller spent 34 years at NCUA — fourteen as a problem case officer and examiner in the Western Region, a decade as a regional capital markets specialist with a hand in writing much of the agency’s interest rate risk and liquidity policy, and another decade as a director of special actions supervising problem case officers and regional specialists.The conversation covers where unsafe and unsound actually lives in the Federal Credit Union Act and in Part 741, the two-part test in the final rule, the shift from “merely possible” to “likely,” the exclusion of reputation risk that is not tied to financial condition, the tailoring provision that forces a directive to get more specific as potential losses grow, the two changes between the proposal and the final rule, and the new supervisory observations category that lets examiners share expertise without creating a requirement that goes to the board. It closes with Todd reading NCUA’s DOR criteria straight out of the NSPM — which, as he points out, rhymes.

Document of Resolutions can be complex or simple.  Regardless, they usually have many steps that NCUA doesn't realize, but you need to track.  We discuss the ins and outs of DOR project management in this archive episode.

www.marktreichel.comhttps://www.linkedin.com/in/mark-treichel/NCUA started sending a rewritten exam entry letter to credit union CEOs in late July and early August. It is not a formatting change. For the first time, the letter states what the exam is actually about.Mark Treichel is joined by Todd Miller and Steve Farrar of Credit Union Exam Solutions to go through the new template line by line and compare it against the one it replaced.The old template did not define or limit the substantive focus of the exam. Scope was whatever the exam team decided it was. The new template says the exam will focus on safety and soundness, significant compliance with applicable laws and regulations, and whether there is material financial risk. Steve traces that phrase across all three federal banking regulators and back to the Silicon Valley Bank failure. Todd points out that "material" is not defined by NCUA or anyone else, and that you can drive a truck through the barn door of what counts.Underneath all of it is staffing. Todd puts NCUA’s reduction at 27 percent and the FDIC’s at roughly a third. Examiners are playing triage, and the letter is the agency telling them what to stop looking at.The conversation covers what the letter now makes explicit that used to live as an unwritten rule in the national supervisory policy manual — including that examiners are supposed to work with management on corrective actions before the DOR is drafted, and that supplementary facts and informal discussion items are not actionable concerns. Todd’s read is that this took a tool away from examiners. Mark’s read is that the pressure does not disappear — it moves into supplementary facts, into the scope workbook, and into the close section the credit union never sees.Also covered: why compensation, vendor contracts, and pricing being off limits sits badly next to a decade of third-party due diligence pressure, and why it costs small credit unions the most; the mandatory exit meeting; the codified right to record joint conferences and exit meetings, and why recordings matter on appeal; VPN access and the two-week notice; CUSO records; direct examiner contact with external auditors; and the disappearance of unencrypted media and chain-of-custody transfers.Steve closes with a practical checklist for the day the letter lands: name the point person, resolve ambiguous requests before you upload anything, ask for extensions early and say why, and put someone on version control.

Guest: Vin Vieten, former NCUA Senior Credit SpecialistKey Topics:- Financial analysis for commercial lending- Credit proposal best practices - Global cash flow analysisKey Takeaways:1. Financial Analysis:   - Should be well-organized, consistent, and comprehensive   - Analyze 3+ years of financial performance to establish trends   - Examine income statement, balance sheet, and cash flow   - Provide value to borrowers through expert financial review2. Credit Proposals:   - Use a standard, logical format    - Include key information like ownership structure, industry analysis, repayment ability   - List all direct and related debt to show total relationship exposure   - Assign and justify an appropriate risk rating   - Highlight exceptions to policy on the cover page3. Global Cash Flow:   - Analyzes borrower, guarantor, and related entities to understand overall risk   - Depth of analysis depends on transaction complexity and risk level   - Should drive understanding of risk, not just regulatory compliance   - Default expectation is to obtain guarantees; exceptions must be well-documentedResources Mentioned:- NCUA Examiner's Guide on financial analysis and credit approval documents- Preamble to the proposed MBL rule from July 2015

A five-agency statement clarifies what SAR confidentiality actually protects, separating the report itself from the underlying facts, transactions, and documents. The discussion explores how fraud holds, account closures, and member communications intersect with BSA and consumer compliance exams. It closes with a practical three-step review of training, frontline scripts, and internal policies.

OverviewIn this episode, we break down the fundamentals of risk management for credit unions — what it really means, why it matters at every asset size, and how boards and executives can build a resilient framework that supports safe, sustainable growth. blog risk appetiteWhat We CoverThe Three Pillars of Risk ManagementRisk Culture — how tone from the top determines effectiveness.Risk Appetite — defining how much risk is acceptable before strategy becomes unsafe.Risk Management System — the controls, processes, and oversight that put culture and appetite into action. blog risk appetiteWhy Size Matters — and Doesn’tPractical guidance for smaller credit unions: clear limits, strong oversight, and effective supervisory committees.What larger credit unions need: formal risk appetite statements, risk departments, and comprehensive reporting frameworks. blog risk appetiteCommon PitfallsThe “capital trap”—why even strong net worth can’t compensate for unmanaged concentration risk (e.g., taxi medallion credit unions).Siloed risk decisions.Hoping limit breaches “self-correct.” blog risk appetiteBest Practices for a Strong FrameworkAlign appetite with capital and strategy.Use clear metrics to monitor risk.Establish formal limit-breach processes.Encourage staff to raise risk concerns without hesitation.Maintain strong documentation and communication. blog risk appetiteKey TakeawayRisk management isn’t about eliminating risk — it’s about managing it in a way that protects members while enabling growth. A clear culture, aligned risk appetite, and well-designed system create the foundation for long-term success. 

www.marktreichel.comhttps://www.linkedin.com/in/mark-treichel/Recorded August 30. A short episode looking ahead at the last four months of the year, plus one development worth flagging now.NCUA sent out a letter on how the exam process is going to work this coming cycle. It went to credit union CEOs. It was not posted on NCUA’s website. Mark has a copy and will cover it in an upcoming episode with Steve Farrar and Todd Miller of the Credit Union Exam Solutions team.An attorney pointed out that an item on bylaws went out the same way — to CEOs, not listed online. That’s two communications in short order that credit unions received directly and that the public record does not reflect. Mark has thoughts on why NCUA may be handling it that way. He does not agree with it.Also in this episode: the FDIC and OCC’s new final rule on safety and soundness and whether NCUA needs one of its own; what is likely to land on NCUA’s agenda in the remaining four months; a coming episode on ten things a new chairman should do for clarity and sunshine; the ex-regulator panel of John McKechnie, Geoff Bacino, and Alonzo Swann returning in the fourth quarter, probably after John Crews’s first board meeting; the Inspector General’s report to Congress; and new YouTube shorts that will not appear on the podcast feed.

www.marktreichel.comhttps://www.linkedin.com/in/mark-treichel/ | WFC Classic: Capital Rules and Risk Management for Credit Unions

Summary:In this special Archive episode of With Flying Colors, Mark explores the meaning and implications of "agreed upon corrective action" in credit union examinations. Drawing from his experience at NCUA, Mark explains how this term appears on examination reports and why its proper implementation is crucial for credit unions.Key Points Covered:Mark begins by breaking down the literal meaning of "agreed upon" using dictionary definitions, emphasizing that it means coming to a mutual arrangement or understanding. He shares a recent case where a small credit union reached out about their examination frustrations, highlighting how the agreed-upon process can sometimes break down.The Process:The examination report process typically includes a draft phase where credit unions can review and discuss findings with examiners. However, due to year-end pressures and internal goals, sometimes reports are finalized without proper consultation. Mark explains that the examination report's cover page explicitly states it should document "agreed upon corrective actions," making it important for credit unions to ensure they actually have input in this process.Recommendations for Credit Unions:Mark advises credit unions to push back when they don't receive proper opportunity for input. He suggests starting with the examiner, then moving up to the supervisory examiner if necessary. While NCUA has final authority on safety and soundness issues, credit unions should still receive the opportunity to influence report language to better serve their needs and their members' interests.Important Context:The podcast notes that NCUA implemented a higher level of review for examination reports, requiring supervisory review. While this creates more consistency, it can sometimes make immediate dialogue more challenging, especially when reports are delivered as final without prior discussion.Closing Thoughts:Mark emphasizes that credit unions must decide when to "go along to get along" versus when to advocate for changes. The goal should be finding language that satisfies both NCUA's safety and soundness requirements and the credit union's operational needs.Contact Information:Listeners can learn more about Mark's services at markteichel.com. The podcast releases new episodes once or twice weekly, providing expert insights on achieving success with NCUA.Listen AnywhereListen OnApple PodcastsListen OnSpotifyListen OnOvercastListen OnPocket CastsListen OnAmazon MusicListen OnYouTubeMore Options »

www.marktreichel.comhttps://www.linkedin.com/in/mark-treichel/Federal credit unions are limited to investing 1% of their assets, in the aggregate, in credit union service organizations. That number went into the Federal Credit Union Act in the 1970s, and when NACUSO went back and researched it, they found no legislative history explaining why 1% was chosen. It is, as NACUSO general counsel Brian Lauer puts it, truly an arbitrary number — and it is now colliding with the capital requirements of artificial intelligence, cryptocurrency, and stablecoin.In this episode, Mark Treichel is joined by Brian Lauer, general counsel to the National Association of Credit Union Service Organizations (NACUSO) and a partner at Messick Lauer & Smith P.C., for a wide-ranging conversation on where CUSOs stand and where the rules governing them are headed.Brian explains why NACUSO has shifted from a defensive posture on Capitol Hill — largely a response to NCUA’s push for vendor authority — to an offensive one. Over roughly the last 18 to 24 months the association has been on the Hill four times and returns in September, as its own organization rather than as part of an industry fly-in, pushing for changes to the Federal Credit Union Act that would eliminate the 1% cap and let credit unions manage CUSO investments on a balance-sheet-by-balance-sheet basis, the same way boards already manage capital above the statutory prompt corrective action floor.The conversation also covers a second statutory issue that gets less attention: the "primarily serves" limitation. As Brian describes it, "primarily serves" is not a limitation on investment powers in the Act, but when NCUA wrote the modern CUSO regulation in the 1990s it conflated investment and lending and applied the standard to both. The practical effect is that a credit union asking for a strategic seat at the table with a technology company has to tell that company half its business must be with credit unions — and the company is usually the one that walks away.Elsewhere in the episode: why NCUA’s CUSO numbers are unreliable, with the most recent registry list dating from 2024 and no verification of the self-reported data, even as Brian’s own practice forms 30 to 40 CUSOs a year; the consolidation and acquisition activity now visible in the CUSO space, including third-party vendors buying CUSOs that fit their lanes and regional CUSOs merging across geographies; and what a one-member NCUA board does to the regulatory pendulum — faster swings, Brian argues, with less compromise built in.The episode closes on the GENIUS Act. CUSOs are named in the legislation, which Brian calls a real win, and federal credit unions that want to issue a payment stablecoin will need to do it through a CUSO. He makes the case that credit unions need a stablecoin of their own for the same reason they needed shared branching, that the only way it works is through collaboration among a large group of credit unions — he estimates closer to 1,000 than 100 — and that adoption will likely be slower than the conversation suggests, with the payments side mattering most. Mark adds the argument that moved him from skeptic to something closer to convinced: if stablecoin helps keep the dollar the world’s reserve currency, that is a reason to want it developed here rather than somewhere else.Brian can be reached through his firm at cusolaw.com and on LinkedIn. NACUSO’s annual conference is in Las Vegas in the spring of 2027, and the association also runs the VentureTech event for credit unions focused on technology.Concise version — social and discoveryFederal credit unions can invest only 1% of assets in CUSOs. That number went into the Federal Credit Union Act in the 1970s, and there is no legislative history explaining where it came from.Brian Lauer, general counsel to NACUSO and a partner at Messick Lauer & Smith P.C., joins Mark Treichel to explain why that arbitrary ceiling now matters more than it ever has — and what NACUSO is doing on Capitol Hill about it.Inside the episode: the 1% cap and the campaign to remove it; the "primarily serves" limitation that keeps credit unions out of strategic fintech investments; why NCUA’s CUSO count cannot be trusted; CUSO consolidation and acquisition activity; what a one-member NCUA board does to the pace of regulatory change; and why any credit union stablecoin under the GENIUS Act will have to be issued through a CUSO — and will only work through collaboration.