In first letter to CUs of year, regulator outlines exam/supervision initiatives

Initiatives designed to “improve and modernize” exams and supervision – which aim to replace “outdated, end-of-life examination systems,” among other things – are outlined in the first “letter to credit unions” published by their federal regulator in 2018.

In its Letter to Credit Unions (LTCU 18-CU-01), the National Credit Union Administration (NCUA) Monday outlined the examination and supervision initiatives as tools for streamlining processes, adopting “enhanced examination techniques” and leveraging “new technology and data to maintain high quality supervision of insured credit unions with less onsite presence.”

The letter was addressed to board members and chief executive officers of each of the more than 5,500 federally insured credit unions – that is, those chartered by both the NCUA and state supervisory agencies, but all insured by the National Credit Union Share Insurance Fund (NCUSIF), the government fund that insures savings in credit unions.

The message is the first LTCU of 2018. Typically, by this time of year (since 2010), the agency has issued, on average, six such letters which serve as direct communications from the agency to the federally insured credit unions. In 2017, the agency sent nine LTCUs; since the financial crisis ended at the beginning of the decade, the agency has sent 84 direct communications to credit unions.

According to NCUA’s website, LTCUs are intended to “provide guidance on specific NCUA policies and procedures, compliance requirements and other timely issues that affect all federally insured credit unions.”

The letter noted that the agency has recently approved and implemented five initiatives to modernize the its exam processes. Those are: the Flexible Examination Pilot Program (FLEX); Office of National Examinations and Supervision (ONES) Data Driven Supervision; the Shared NCUA-State Regulator Federally Insured, State-Chartered Credit Union (FISCU) Program; the Enterprise Solution Modernization Program (ESM); and the Virtual Examination Program.

“These five initiatives are interrelated and complement each other,” the letter states. “As these initiatives support and build upon each other, they will ultimately result in a fully modernized examination and supervision program with various incremental improvements occurring along the way.”

The agency said some intended benefits of the initiatives are:

  • More efficient examinations and supervision
  • Reduced burden on credit unions
  • More consistent and accurate supervisory determinations
  • Greater ability to adapt to changes in the marketplace and credit union business models
  • Enhanced coordination with State Supervisory Authorities
  • Reduced travel costs
  • Improved quality of life for examiners
  • More secure, reliable, and flexible technology foundation able to support future expansion capabilities

The letter also provides more details for each of the initiatives.

“Modernizing agency systems and processes will reduce burden on the credit union community and increase the effectiveness of the NCUA,” NCUA Board Chairman J. Mark McWatters (who signed letter) wrote. “Agency staff will continue to seek credit union input on ways to reduce the burden of the supervisory process without sacrificing the mission of the agency. Ongoing communication and transparency are key in the success of these endeavors.”

Letter to Credit Unions (18-CU-01) Examination Modernization Initiatives