This Appendix describes FSRA’s quality assurance processes in determining a CU’s ORR and IL as well as the processes that a CU may follow to request a reconsideration of the ORR and IL determined through FSRA’s supervisory assessment process.
FSRA’s approach to quality assurance and reconsideration
FSRA’s supervisory approach focuses on the identification of inherent risks of a CU’s significant activities and their respective quality of controls and oversight functions. This is followed by the assessment of capital (including earnings), liquidity, and resilience to arrive at the ORR and IL.
Levels of quality assurance
FSRA’s determination of a CU’s ORR and IL may include up to five levels of quality assurance. The first three levels apply to all CUs irrespective of their size, complexity, and risk profile. The last two levels apply to larger or more complex CUs and other CUs on a case-by-case basis, for example for CUs with elevated risk profiles. FSRA engages in ongoing dialogue with CUs throughout the quality assurance process to present observations, complete fact checking work, and identify areas for enhancement before the ORR and IL are finalized and the Interim Supervisory Letter is issued. The Interim Supervisory Letter provides the ORR and IL for the CU and includes the rationale for the ratings, which include any requirements and recommendations.
Level 1: Assessment team
FSRA’s assessment team consists of a Relationship Manager (“RM”) and other supervisors. The RM coordinates the work of the assessment team and leads the aggregation of the work to determine the preliminary ORR and IL of the CU.
Level 2: Director
Following the supervisory assessment carried out by the assessment team and determination of the preliminary ORR and IL, the Director, CU Supervision (“Director”) reviews the relevant documents, ratings, and rationale and provides feedback to the team. Once the comments and proposed changes have been addressed by the assessment team the Director approves the ratings and related documentation that provides rationale for the ratings.
Level 3: Head
Following Director-level approval, the Head of FSRA’s CU Prudential Supervision department (“Head”) reviews, provides feedback to the Director and assessment team, and approves the ORR, IL, and supporting documentation once the comments and recommended changes have been addressed.
Level 4: Review panel
Level 4 of the quality assurance process applies as needed, including to all large or complex CUs, and CUs with elevated risk profiles irrespective of size. FSRA will convene a panel of internal subject matter experts composed of independent senior staff (i.e., staff who are not part of the initial assessment) to scrutinize and challenge the assessments to ensure the ratings are accurate and the RBSF-CU has been applied consistently.
As part of the review process the Panel meets with the assessment team to provide feedback and discuss the rationale and supporting information for the ratings. The feedback may require the assessment team to revisit their proposed ratings, provide further supporting information and rationale for the ratings, and amend the ratings and related documentation. The Panel will approve the ORR and IL after the assessment team has addressed the Panel’s feedback through an iterative process.
Level 5: Executive Vice President (EVP)
Level 5 of the quality assurance process applies to all large and complex CUs and may apply to other CUs including CUs with elevated risk profiles. The EVP reviews, provides feedback, and ultimately approves the ORR and IL.
The reconsideration process for supervisory assessments is available to a CU within 45 business days after receiving its Interim Supervisory Letter and is limited in scope to facts, observations, circumstances, and rationale that led to FSRA’s determination of the CU’s ORR and IL. Material changes made by a CU after receiving a preliminary ORR and IL will not be considered in the reconsideration process. However, FSRA will consider such changes as part of subsequent supervisory work to assess how a CU has implemented remedial actions to address FSRA’s requirements, recommendations, and observations. As documented in the RBSF-CU material changes including improvements to a CU’s risk profile will be reflected in updated ORR and IL.
To access the reconsideration process the CU must establish on a reasonable basis that relevant information was submitted by the CU for supervisory assessment and either:
- it was not reviewed by FSRA when determining the ORR and IL
- it was inaccurately or incorrectly interpreted by FSRA during the supervisory assessment process resulting in the ORR and IL that do not accurately reflect the risk profile of the CU
If a CU can demonstrate that such a reasonable basis exists, it may proceed with the following process, which must be commenced within 45 business days after the receipt of the Interim Supervisory Letter:
- Write to the EVP, Credit Union and Insurance Prudential to request a review of their ORR and IL. The CU must provide a detailed rationale and supporting documentation.
- The EVP will review the rationale provided, investigate as required, and decide if a change is warranted.
- The EVP will communicate the decision in writing to the CU within 45 business days of receiving review request from CU.
- If the CU has reasonable grounds to request a reconsideration of the EVP’s decision, then the CU may write a letter to the CEO of FSRA requesting further review. The letter must specify what information was not reviewed by or was misinterpreted by FSRA.
- The CEO of FSRA will consider such submissions and then determine in their discretion if further review is required. If further review is required, the CEO will take such steps deemed appropriate based on their discretion to make a final decision.
Once the reconsideration process described above has been exhausted, the CEO’s decision made in connection with the determination of a CU’s ORR/IL shall be final and binding on all parties involved.