WFC Classic: Facing the Challenges of a CAMEL Code 4

Crisis Communications what to do and what not to do with John McKechnie.

www.marktreichel.comhttps://www.linkedin.com/in/mark-treichel/The Friday after the midterm election, Mark Treichel is joined by John McKechnie and Geoff Bacino, both formerly of NCUA, to talk through what a Democratic House and Senate mean for credit unions and for the National Credit Union Administration (NCUA).John compares this week to the wave elections of 1994 and 2006. He explains why credit unions will need to readjust their messaging to Congress, because Democrats and Republicans like to hear different things. Geoff walks through the leadership changes. Senator Elizabeth Warren is expected to chair Senate Banking. Maxine Waters is likely to chair House Financial Services, though she may face a challenger. And a Democratic Senate now controls nominations.The panel discusses whether NCUA could spend the next two years with a one-member board, the unresolved lawsuit by former board members Harper and Otsuka, and what the Supreme Court's decision on removing independent agency board members means for who will take these jobs. Mark raises Senator Warren's letter to the NCUA Inspector General and the prospect of oversight hearings involving Chairman John Crews.John explains why "credit union friendly" depends on the issue. Democrats line up with credit unions on powers and the fight with the banks. Republicans line up with credit unions on regulatory balance. He also describes what a reinvigorated Consumer Financial Protection Bureau (CFPB) could look like after 2028. Mark looks at it from the exam side: shorter exams, kinder coding, a proposed CAMELS rule that as written looks backward at data, and a pendulum that could swing back in 2029. Geoff credits NCUA's Office of Credit Union Resources and Expansion (CURE) with a far more pragmatic approach to field of membership, mergers, and new charters.As of the Friday recording, John noted about 28 House races and two Senate races still uncalled. He cited a 41-seat Democratic pickup in the House and a seven-seat pickup in the Senate that could grow to nine.The episode closes on what a Democratic Congress can pass with a presidential veto in play: the idea behind the Credit Card Competition Act, overdraft, interest rate caps, and crypto. John also explains why he sees less of a threat to the credit union tax exemption this Congress.

In this episode of With Flying Colors, Mark Treichel sits down with Todd Miller to explore what makes credit union policies effective — and what separates the policy frameworks at high-performing credit unions from those that consistently generate examination findings. Todd, who spent over 33 years at NCUA including a decade as Director of Special Actions, draws on his experience examining credit unions across the full performance spectrum. He shares what he consistently saw in top-performing organizations: strong written policies that created transparency at every level, from the boardroom to the branch. The conversation covers why policies matter beyond regulatory compliance, including their role as training tools, culture builders, and accountability mechanisms. Todd outlines the general principles that underpin effective policy management — from top-down implementation and accessibility to the importance of consequences for non-compliance and the disciplined handling of policy exceptions. The heart of the episode is Todd's breakdown of common elements that should appear in every credit union policy, regardless of subject matter: purpose and objectives, accountability structures, risk appetite statements with real limits, systems of trend-based reporting, and scheduled review processes. He explains why policy limits should be unique to each credit union, why guidelines are no substitute for hard limits, and why trend reporting matters more to board members than point-in-time snapshots. Mark and Todd also discuss the connection between policy compliance and organizational culture, including how violations of individual authority limits can erode morale, create bond claim exposure, and — in the most serious cases — lead to insurance fund losses.

www.marktreichel.comhttps://www.linkedin.com/in/mark-treichel/NCUA has released its 2027 staff draft budget, and this is Mark Treichel's first take: what it is, what changed, and what's missing. It's a two-year budget, 2027 and 2028, so NCUA can keep operating if it doesn't have a full board or can't get a vote. Mark sets the 2028 figures aside to keep it simple.Headline numbers•     Budget just over $325 million, up 2.9% — $9.2 million over the 2026 approved amount. That increase is essentially pay: NCUA is required to maintain comparability with the other banking regulators and has a union contract it has to live up to, and it typically pays non-union staff similarly.•     972 full-time equivalents (FTEs), up five from last year and down 23% from the peak of 1,255 in the 2025 budget, after the buyouts.•     Overhead transfer rate (OTR) of 62% — a number NASCUS will comment on.•     Operating fee down 49 basis points, after a large drop last year tied to the reorganization and buyouts.•     Operating budget up 8.2%: pay and benefits and contracted services up, travel down a little, rent, communications, utilities, and administrative up a little.•     Roughly 70% paid by federal credit unions through the operating fee and their share of the OTR; roughly 30% by state charters, for insurance-related exam work.Also in this episode•     Why calling it a "staff draft" is a little funny, and why the budget used to be Mark's Super Bowl as NCUA Executive Director.•     The reorganization: target date now December 2027; prioritize statutory and most critical work, consolidate units with like functions, raise the supervisor-to-employee ratio, use technology for efficiency. The Office of the Chief Economist has been rolled into the Office of Examination and Insurance (E&I). About $1 million of a $16 million reorganization fund was spent.•     The Office of National Examinations and Supervision (ONES): the draft doesn't say what's happening. ONES' budget is down 1.2%; the large credit union analytic tool, paid from the insurance fund, is up 7.2%, mostly tied to stress testing.•     AI becomes SI: $4.3 million earmarked for superintelligence/AI after Executive Order 14434. "It's a name, it's not a mandate." Some of the five new positions go to AI, paired with a zero-trust cybersecurity push. The artist formerly known as Prince, and the time "lump sum" became "pay policy."•     Questions the draft doesn't answer: will examiners use AI and credit union data in exams; what governance and model risk controls apply; how results are explained to credit unions; which vendors, and where the data goes.•     New initiatives: the GENIUS Act and stablecoin issuers, the 21st Century Road to Housing Act, and possibly a new position — Mark's words, not NCUA's, likely on the stablecoin side. Deregulation year two turns to more complex rules; Mark guesses commercial lending and risk-based capital, and "time will tell."•     Line items: $300K to digitize chartering; cybersecurity $4.7 million including a $3 million firewall refresh; CDRLF grant system $605K; e-discovery $300K; board priorities $500K; Asset Management and Assistance Center (AMAC) liquidation tracking tool $106K, charged directly to the Share Insurance Fund.•     Material loss reviews: Jackson Area Federal Credit Union could be a large one. MLRs appear once in the draft, in the audit and financial management support category (4.4% of contracts, about $3.2 million). The inspector general's budget rises from 4.1 to 4.8 — Mark's guess is contracting, potentially tied to MLRs.•     What's missing: the draft has gone from a peak of 109 pages in 2021 to 26. What came out, year by year — and in 2027, positions by office and per-office line items for pay, travel, rent, admin, and contracts.•     Three possible reasons the office detail is gone, two good and one bad — and why Mark doesn't think it's the bad one.•     Why Congress required a public draft, what the law says, the fair counterpoints, and what to watch and ask for. Mark plans a follow-up after the hearing.

www.marktreichel.comhttps://www.linkedin.com/in/mark-treichel/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.

Mark Treichel, Steve Farrar, and Todd Miller discuss Letters of Understanding and Agreement—when NCUA uses them, what boards need to understand before signing, and how to satisfy one once it's in place.What You'll LearnThe difference between published and unpublished LUAs and why it matters for reputation riskWhy dissenting board members are still accountable after an LUA is signedHow to negotiate LUA terms before committingWhat "achieving intended results" means for satisfying an LUAWhen to bring in outside counselKey TakeawaysLUAs signal serious problems. Most credit unions receiving one are classified as troubled. NCUA has exhausted informal options.Voting no doesn't protect you. Every board member is accountable once the board signs, regardless of how they voted.Negotiate before you sign. Ensure timeframes are realistic and you have resources to deliver.Focus on root causes. If everything's a priority, nothing is. Identify the fundamental issues.No expiration date. LUAs stay open until NCUA says you've completed actions AND achieved results.Guest BackgroundSteve Farrar: 30+ years at NCUA; wrote the enforcement manualTodd Miller: Nearly 35 years at NCUA; former Director of Special ActionsConnectQuestions about LUAs or other enforcement actions? Contact Credit Union Exam Solutions at marktreichel.com

www.marktreichel.comhttps://www.linkedin.com/in/mark-treichel/NCUA’s deregulation project is moving again. John Crews has his first package, three proposed rules out for comment, and in this solo episode Mark Treichel walks through one of them: the incidental powers rule.The bottom line: this is a clarifying rule, not a new power. One sentence is being struck from the petition section, and two sections are being touched, the petition section and the scope section. There are zero new requirements, zero new costs, and zero new information collections for federal credit unions. The message is that a federal credit union does not need an Office of General Counsel (OGC) opinion before petitioning the NCUA board to approve a new incidental powers activity.In this episode:•     Where incidental powers fit: the express powers in the Federal Credit Union Act versus the activities NCUA has pre-approved as necessary or requisite to the business•     The pre-approved categories, from certification services and charitable donation accounts to excess capacity, finder activities, stored value products, and trustee and custodial services•     The two doors: asking OGC whether an activity already fits a pre-approved category, or petitioning the NCUA board directly•     The 2001 problem: the preamble said an OGC opinion wasn’t required; the rule said you should get one•     What the scope section drops, and why the rule doesn’t apply to corporate credit unions•     What stays the same: the categories, the application contents, and approval for one federal credit union meaning approval for all•     Why a call to OGC can still be a smart thing to do•     State charters: this is not your rule•     The comment deadline: on or about December 14, a 60-day period from October 15 publicationRead the proposed rule: [Federal Register link]Questions about an activity your credit union is considering? Reach out to Mark at marktreichel.com.

 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.

www.marktreichel.comhttps://www.linkedin.com/in/mark-treichel/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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