KENNEWICK, Wash.–The Endangered Small Credit Union Defense (ESCUD) has submitted formal comments to the Federal Financial Institutions Examination Council strongly supporting proposed revisions to the CAMELS rating system.
As the CU Daily reported earlier, the proposal would refocus exams on material financial risks, remove the special weighting of the Management component in composite ratings, narrow Management evaluation factors, and set a clearer materiality threshold for adverse findings.
“For small credit unions—typically single-office operations with lean staffs of five–15 employees—these changes would reduce time spent on documentation, subjective ratings, and non-material issues,” said Doug Wadsworth, the CEO of Tri-CU FCU, who leads ESCUD.
Wadsworth noted ESCUD surveys consistently rank examination exhaustion and over-compliance pressure among the top barriers to small-credit-union survival, nearly equal to CECL and BSA burdens. Healthy institutions often face multi-week exams and pressure to adopt costly “best practices” beyond regulatory minimums, diverting resources from members, the organization added.
Simple Balance Sheets, Limited Staff
“Our members operate with simple balance sheets and limited staff,” the ESCUD letter states. “These revisions would let healthy small credit unions spend less time responding to non-material findings and more time serving their communities.”
Wadsworth said the effort builds on ESCUD’s recent advocacy wins at the NCUA, including simplification of vital records rules, removal of reputation risk from exams, and supervisory committee relief. ESCUD continues to push for targeted relief from CECL, NMLS, HMDA, and BSA burdens that hit the smallest institutions hardest.
ESCUD is urging the FFIEC to finalize the revisions as proposed—or strengthen them further toward true material-risk focus. Small credit unions seek proportionate oversight, not weaker standards.
2 Responses
Now we don’t want management of small CU’s evaluated and accountable? Literally all conserved or liquidated cus in the last few years are small CU’s. Every situation was caused by negligent management or fraud, including notably the most recent major fraud issue that small credit unions gave the industry a huge black eye for and sparked more heated rhetoric from the bank lobby. This advocacy is just wrong.
Proportionate oversight is a matter of perspective. Small CU failures are hurting the industry and raising costs for large CU’s. They should be regulated in proportion to the incidence risk to the system – not the asset exposure, so until failures can be prevented we need tighter regulation of small CU’s. The fraud case in a 75 million CU that was irrelevant to the industry and probably their members created a highly disproportionate impact to the entire movement’s credibility and reputation, and served up a huge softball to the bankers.
All failed cu’s were healthy – until they weren’t. Simple balance sheets? Well, they dont fail because of derivative positions. They fail by making bad loans on vanilla products. That thinking is precisely the problem – a risk recognition problem, let alone ability to manage it. Non-material? In who’s judgment? The road is littered with failed institutions that though Lt the risk is non-material. While the NCUA needs to step up and provide stronger regulation of smaller CU’s, I’ll still defer to them in what is material and what isn’t.
Same discussion about core viability. We have a subsidized industry through a tax exemptation. Isn’t that enough? Now some want even more subsidy – it’s just in a different form. At what point do you realize you don’t have a viable model when you can’t compete or thrive without being subsidized?