‘Exam flex’ recommends some FISCUs eligible
for extended exam cycle’

Oct. 6, 2016 -- “Enhanced coordination of exams for federally insured, state-chartered credit unions,” and a joint NCUA-state supervisor working group, would begin early next year, subject to approval by the NCUA Board, as two recommendations of the agency’s “Exam Flexibility Initiative” (EFI), released today.

The agency also announced that, as part of the EFI, well-managed, low-risk federal credit unions with assets of less than $1 billion could move to an extended examination cycle beginning next year, also pending approval by the NCUA Board.

According to the report, some FISCUs would also be eligible for the extended exam cycle (that is, examination not less frequently than every 5 years), but only after meeting certain criteria. Those include: All federally insured, state-chartered credit unions (FISCUs) with assets under $50 million; if assets greater than $50 million (but less than $250 million), the credit union must have a composite CAMEL score of 1, 2 or 3; if assets $250 million or greater (up to $1 billion), the credit union must have a composite CAMEL of 1 or 2. FISCUS with assets of $1 billion or more are not eligible for the extended cycle, and will face an 8- to 12-month exam cycle. NCUA stated that this approach “ensures parallel treatment of credit unions greater than $1 billion, regardless of charter type.”

Additionally, NCUA announced it would establish a joint NCUA-State Supervisor Working Group at the start of next year. The agency stated that the purpose of the group will be to “evaluate and recommend further changes to our examination program for federally insured, state-chartered credit unions.”

“The working group will collaborate to improve coordination and scheduling of joint exams, provide scheduling flexibility, and reduce redundancy where possible,” the agency’s report states. “The group’s goal will be to minimize the burden on state-chartered credit unions that results from having a separate prudential financial regulator and insurer. The working group will also evaluate the efficacy, appropriateness, and feasibility of adopting an alternating examination approach for the supervision of federally insured, state-chartered credit unions.”

The extended exam cycle is one of 10 recommendations the agency’s Exam Flexibility Initiative working group, which began its work this past summer. The group was made up of representatives of various offices at NCUA, including offices of examination and insurance, chief economist and CFO. According to NCUA, 79 stakeholder comments were received and considered by the group. Additionally, the agency stated, the working group held calls with five state regulators.

“NCUA is committed to improving operations, responding to change, and finding ways to meet the needs of the credit unions we regulate while protecting the members whose money we insure,” NCUA Board Chairman Rick Metsger said. “We want to be more efficient and more effective while always putting safety and soundness first. We launched this initiative last May as part of the continual quality improvement program, and the working group has been diligent about gathering information and suggestions from credit union stakeholders throughout the process. I am looking forward to discussing the working group’s recommendations at our next Board meeting.”

The NCUA Board is scheduled to consider the working group’s recommendations as part of the agency’s 2017–2018 budget, scheduled to come before the Board at its Nov. 17 open meeting.

With Board approval, the following recommendations would become effective Jan. 1, 2017:

The agency also stated that it could make other changes as of July 1, 2017, including improvements in examination planning and the issuance of a post-exam survey, if the Board approves those recommendations, the agency stated.

NCUA Exam Flexibility Initiative report