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A Direct Line Blog

NCUA Exam Modernization

March 15, 2017 8:30 am

By Donya Parrish

Ever since the NCUA announced an exam modernization initiative in early 2016, I have heard a common statement from credit unions— “aren’t we moving to an 18-month exam cycle?” While longer exam cycles for some credit unions are part of NCUA’s plan, there is more to it, and not all of it applies to every credit union. This week seemed like a good time to review some of the recent announcements about changes that are coming.

During GAC, NCUA was part of a breakout session that reviewed the agency’s plans to update the exam process, and a few of them directly impact Montana. We are also pleased to see that a couple seem to be in direct response to conversations we held with the Agency during our June 2016 Regulators Meeting and CEO evening with NCUA Region IV director C. Keith Morton (see those noted with * below).

Here are the key changes discussed during the breakout session:

  1. It may take two years for NCUA to fully transition qualifying credit unions to the extended exam cycle, so there may be instances where NCUA schedules exams that aren’t following the extended cycle.
  2. *NCUA will notify credit unions approximately four weeks in advance of the examination.
  3. Small federal credit unions with limited segregation of duties that would otherwise qualify for an extended examination cycle, may be examined more frequently (remember that a limited segregation of duties was listed as a supervisory concern and an area of focus for 2017).
  4. For federal credit unions between $30 – $50 million coded CAMEL 1, 2, or 3, it is up to the discretion of the NCUA region to determine if the examination will follow the procedures used for the small credit union examination program (SCUEP).
  5. *A pilot program to reduce NCUA’s presence on-site is underway in Region 4. That includes CO, IL, IA, KS, MN, MO, MT, NE, NM, ND, OK, SD, TX, and WY.  Looking ahead long-term, NCUA is thinking virtual examinations.
  6. NCUA will try to conduct federally insured state-chartered credit union examinations with the appropriate state supervisory authority. If NCUA is unable to schedule a joint exam, then NCUA will conduct an independent insurance review.
  7. NCUA has established its working group with state regulators. Based on the discussions of future meetings of the working group, it is possible that NCUA may adopt an alternating exam approach for federally insured state-chartered credit unions.

This summary also notes the exam priorities that came out of the feedback and those that will be incorporated into the pilot program. Since Montana is in Region 4, and part of the pilot program, we encourage all of you as board members to provide feedback. Your voice does matter and change can be a positive!

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