Development Best Practices in Credit Union Supervision: Administrative Actions

This paper discusses the different administrative actions that the regulatory authority can take against a problematic credit union. They include:

• Preparing a well-written Document of Resolution (DOR): This is the key document for problem resolution and states the corrective action needed to solve the problem;
• Letter of Understanding and Agreement (LUA): This is used when the DOR proves ineffective;
• Cease and Desist Order: This allows resolution of problems in a solvent credit union, while preserving and strengthening the credit union's managerial and financial integrity;
• Monetary penalties: The penalty amount depends on the severity of the action committed;
• Removal of officials: The regulatory authority has the right to remove officials who have violated rules and regulations;
• Prohibitions: This stops any institution-affiliated party from participating in the affairs of a credit union;
• Establishment of special reserves: These are designed to prevent further deterioration of a credit union's financial condition;
• Conservatorship: The regulatory authority takes immediate possession and control of a credit union's business and assets and may operate the credit union until it decides the future course of action;
• Mergers: These occur when two or more credit unions join together and operate as one financial institution for the purpose of continuing and improving services to members;
• Liquidation: This process reduces the loss to the deposit insurance fund and satisfies all demands made by the creditors of the credit union;
• Revocation of deposit insurance, license or charter: The regulatory authority does this if a credit union has violated the laws, rules or regulations.