Financial regulators, including the NCUA, intend to emphasize the need to tailor examinations based on the risk a financial institution poses, the Federal Financial Institution Examination Council said this week.
"A risk-focused supervision process is where more resources are used to address institutions or areas that present heightened risk versus those that do not," the council said, in the second update of its work.
The council is a forum intended to allow financial regulators to discuss ways to increase the effectiveness and efficiency of the examination process. It has reviewed the ways financial regulators have tailored examinations based on the size and risk a financial institution poses and found that state and federal regulators have adopted similar programs for tailoring examinations.
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The NCUA and the other regulators agreed to ensure that examiners:
- Consider the unique risk profile of an institution in developing an examination plan.
- Use existing information to determine higher and lower risk areas when preparing an examination plan.
- Tailor document requests based on the size and the risk a financial institution poses.
- Apply examination procedures in a way that reduces the level of review for low risk institutions.
Credit unions have been pushing for the NCUA to return to an 18-month cycle for all healthy credit unions. The agency already has extended the exam cycle for credit unions with less than $1 billion in assets.
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