A NCUA task force on Thursday recommended adoption of a flexibleexam schedule for credit unions. This recommendation would allowthe agency to extend the length of time between exams for creditunions meeting specific criteria.

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“NCUA is committed to improving operations, responding tochange, and finding ways to meet the needs of the credit unions weregulate while protecting the members whose money we insure,” NCUABoard Chairman Rick Metsger said. “We want to be more efficient andmore effective while always putting safety and soundnessfirst.”

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Metsger announced the initiative in May and asked NCUA Region IVDirector C. Keith Morton to head the effort. The working groupsolicitedstakeholder comments on the exam process. The NCUA board isscheduled to consider the working group's recommendations duringits November meeting.

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Under the recommendations, the NCUA would continue to study waysto reduce the agency's physical presence for exams.

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The working group called for the agency, starting January 1, toextend the exam cycle for credit unions with less than $1 billionin assets, as well as:

  • Have CAMEL code 1 or 2, both in composite and management ratingcomponents;
  • Are well-capitalized per prompt correct active rules;
  • Have no documents of resolution related to significantrecordkeeping problems; and
  • Have no formal or informal enforcement or administrativeorder.

For those credit unions, examinations would begin between 14 and20 months after the previous exam was completed.

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For all other credit unions, starting January 1, examinationswould begin between eight and 12 months after the previous examswere completed.

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The working group also recommended that the NCUA continue toconduct targeted and defined scope exams using the Small CreditUnion Examination Program for financially- and operationally-soundcredit unions with less than $30 million in assets.

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Under the new examination policy, the NCUA would attempt tocoordinate with state regulators examinations of federally insured,state-chartered credit unions. Most state examinations occur every12 to 18 months.

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For those credit unions, examinations would occur not lessfrequently than once every five years, except for credit unionsthat have at least one the following:

  • Greater than $1 billion in assets;
  • Composite CAMEL code 4 or 5 with assets greater than $50million; or
  • Composite CAMEL code 3 with assets greater than $250million.

For those credit unions, examinations would begin between eightand 12 months from completion of the last exam.

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The group also recommended the establishment of an NCUA-StateSupervisor Working Group that would recommend further changes forexaminations of federally insured, state-chartered creditunions.

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The working group also recommended that the agency conductannual exams for a select group of small credit unions that lackthe desired segregation of suties or internal controls to mitigaterisk.

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The group also proposed reinstituting an optional survey forcredit unions to complete after their examinations are completed.And it suggested that the agency improve examiner training.

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Under the recommendations, the NCUA would retain the authorityto conduct more frequent examinations.

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Finally, the task force recommended that effective July 1, 2017,the NCUA begin providing examiners' specific time and scope of theexaminations, as well as provide credit unions more advanced noticeand improve the coordination of documents tailored to a creditunion's risk and products.

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