New exam system closer to rollout, credit union regulator indicates; appraisal rule OK’d, joint BSA exemption green-lighted

Next year is targeted for the official rollout of a new, modernized examination program from the federal regulator that will phase in applications by credit unions depending on their examination date, according to a briefing delivered Thursday to the regulator’s board.

The new Modern Examination and Risk Identification Tool (MERIT), part of the National Credit Union Administration’s (NCUA) enterprise-wide systems update, will initially replace the agency’s current exam platform (the Automated Integrated Regulatory Examination System, or AIRES) and be used by credit unions to interact and share information with examiners, according to information on the agency’s website. This information explains that, through MERIT, credit unions will be able to securely exchange documents with examiners (including accessing exam reports) and will receive user notifications when it’s time to send or retrieve documents.

The project has not kept pace with earlier projections, however. A year ago, NCUA’s Hood forecast that the project would be rolled out to examiners and credit unions in 2020. The coronavirus crisis, however, likely played a role in slowing down progress. Now, NCUA staff said that the system will begin to be rolled out to credit unions about a year from now.

Also according to staff, credit unions will be introduced to the new system in advance of their next examination during 2021. For example, if the credit union’s exam is scheduled for November of 2021, that credit union will be introduced to MERIT in September 2021. If a credit union’s exam was scheduled for earlier in 2021, however, the credit union won’t be introduced to the MERIT system until 2022.

Also at the NCUA Board meeting Thursday:

  • The panel approved a final rule (issued last spring as an interim final rule) on appraisals that defers the requirements for a credit union to obtain an appraisal or written estimate of market value for up to 120 days following the closing of a transaction for certain residential and commercial real estate transactions. The rule, according to NCUA, was issued to provide credit unions with regulatory relief to respond to the financial effect of the coronavirus pandemic. Similar rules were issued by federal banking agencies for banks. The final rule approved was identical to the interim final rule issued in April.
  • Gave the go-ahead for staff to sign an order issued jointly by NCUA and the federal banking agencies to grant an exemption from the Bank Secrecy Act’s (BSA) customer identification program requirements for loans extended by credit unions (or banks) for purchases of property and casualty insurance policies as part of an anti-money laundering program. The order concludes that premium financing is not a useful or efficient means of laundering illicit funds or to provide terrorist financing. The action complements the exemption already provided by the Treasury’s Financial Crimes Enforcement Network (FinCEN).

Modern Examination and Risk Identification Tool (MERIT) Update

Final Rule, Part 722, Real Estate Appraisals

Bank Secrecy Act, Customer Identification Program Exemption.