A semiannual report to Congress covering activities and findings from Oct. 1, 2017, through March 31, 2018, of the National Credit Union Administration (NCUA) Office of Inspector General (OIG) indicates the agency is expected by year-end to develop an “S” rating for the CAMEL rating system to address market risk sensitivity. The change was first suggested in a 2015 OIG report and, if implemented as envisioned, would seek to better capture a credit union’s sensitivity to market risk and improve interest rate risk clarity and transparency.
The OIG sends a report of its activities twice a year to Congress. The report details significant regulatory and legislative changes in the period, gives a status report on previous OIG recommendations to NCUA management, status of investigations opened and closed, and, among other things, details findings from “material loss reviews” related to credit unions that caused material losses to the National Credit Union Share Insurance Fund (NCUSIF).
Regarding investigations, the OIG reports that it issued three investigative reports during the period and referred one person (unnamed) to the U.S. Department of Justice for criminal prosecution.
The report notes 13 outstanding audit report recommendations, some older than others. In addition to the planned CAMEL change noted above, these include, among others, recommendations that examiners obtain third-party confirmations when checking account balances or activity significant to credit union operations (to better spot potential fraudulent activity such as that which led to the demise of one credit union); and that measures be taken to protect credit union members’ electronic information during the exam process (a secure file transfer protocol is near implementation).
The report summarizes findings from a total of eight material loss reviews of institutions that caused an NCUSIF loss of less than $25 million. The credit unions, all since closed, are:
- Shreveport Federal Credit Union;
- New York State Employees Federal Credit Union;
- Tri-Rivers Federal Credit Union;
- Eaton Employees Credit Union;
- Good Street Baptist Church Federal Credit Union;
- Riverdale Credit Union;
- St. Elizabeth’s Credit Union; and
- First Jersey Credit Union.