Show Notes:

As CAMEL codes continue to deteriorate across the industry, credit unions are seeing more examiner findings, documents of resolution, and other informal enforcement actions show up in their exam reports. In this episode, Mark Treichel is joined by former NCUA veterans Steve Farrar and Todd Miller to break down what each of these actions means, how they connect, and what credit union leaders should do when they receive them.

Topics covered in this episode:

The hierarchy of exam report actions — from supplementary facts to regional director letters, and how issues escalate from one level to the next.

What examiners are really telling you with a high volume of findings, and why a long list of minor issues may signal something bigger.

The SMART principle for documents of resolution — Specific, Measurable, Achievable, Results-oriented, and Timely — and where it breaks down in practice.

Why the negotiation process between examiners and credit unions matters, and what happens when that conversation gets shortcut.

The cost problem: when corrective actions require millions of dollars in resources that examiners may not have considered.

What boards should and shouldn't do when asked to approve a DOR at the joint conference.

Corporate governance as NCUA's emerging focal point, and why expectations from larger institutions are creeping down to smaller credit unions.

The critical role of communication — on both sides — in preventing exam report issues from escalating unnecessarily.

Key takeaway: Credit unions that invest in open communication with their examiners, understand the escalation path, and proactively build governance frameworks are far better positioned to manage regulatory expectations — before problems compound.

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NCUA’s proposed rule on fidelity bonds came out October 15, approved by the board on October 13 — the board of one, John Crews. In a very short summary, NCUA proposes to roll back the 2019 procedural mandates in Parts 704 and 713. In this solo episode, Mark walks through what changes, what doesn’t, and what boards should be thinking about before the 60-day comment period closes in mid-December.

The proposal at a glance. Four sections amended: 704.18, 713.2, 713.4, and 713.5. The 2019 procedural mandates on board review, signer rotation, and the sunset of bond forms are rolled back. It’s deregulatory by design. Boards get more flexibility on the process but still owe the credit union adequate coverage for the risk.

How Part 713 got here. 1999: Part 713 created, with the fidelity bond rules moved out of 701.20 and rewritten for clarity. 2005: higher minimum coverage; maximum deductible raised from $200,000 to $1 million for some credit unions. 2019: the process tightened — board review of every application, approval by resolution in the minutes, a rotating non-employee signer, post-liquidation coverage, and a ten-year form sunset. 2021: a technical fix when CAMEL became CAMELS. 2026: rollback proposed.

Why 2019 tightened the process. Losses. Bond issuers rescinded coverage when the person who signed the application already knew about the fraud.

Change one: review, approval, and delegation. The board or a duly authorized individual on the board, supervisory committee, or audit committee reviews and approves the bond. No board resolution is required in the proposed text. Delegation is an option, not a mandate.

Who signs. A board member, or a duly authorized supervisory or audit committee member, who is not an employee. Who cannot sign: the CEO, the manager, or any other employee — the people NCUA sees as most likely to know of a fraud or a pending claim. “Duly authorized” can come from a specific board delegation or by virtue of assigned duties; Mark’s interpretation is that a position description could do it.

Change two: signer rotation goes away. NCUA’s reasoning: a real burden for small credit unions with few non-employee directors to rotate through. The non-employee signer requirement stays, oversight stays with the board, and the annual coverage review is unchanged.

Change three: no more ten-year sunset on bond forms. The Act lets the NCUA Board approve the form of the bond and sets no limit. What stays: NCUA-approved forms only; NCUA can review any form at any time and rescind approval; amended forms and limiting riders still need NCUA approval.

Taking the “should” out of coverage. 713.5(b) — the board should purchase additional coverage as circumstances warrant — is purely advisory and restates existing fiduciary responsibilities. 713.5(c) — increased coverage tied to cash on hand and money in transit — is a two-factor formula NCUA calls prescriptive and ambiguous. Both proposed for removal. Minimum coverage amounts are unchanged. Deductible provisions are renumbered.

Corporate credit unions. Parallel changes: the same delegation option, the ten-year form sunset removal, form approval. A question for comment on whether NCUA should drop the corporate board’s duty to buy coverage above the minimum when necessary. And a one-word fix: “and” becomes “or,” so an amended form or a limiting rider each needs NCUA approval on its own. NCUA says the effect is none.

What doesn’t change. Annual board review. Minimum coverage. Post-liquidation coverage. Approved forms only.

What boards should be thinking about. Nothing changes until a final rule. If you delegate, put it in writing. Keep the signer truly independent. Without the formula, your analysis carries the weight. Weigh in if you have a view — corporates especially.

Comments are due mid-December. NCUA contact: Damon Frank, Office of General Counsel, 703-518-6540.

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