National Credit Union Administration (NCUA) Board Chairman Rick Metsger is initiating a review of the agency’s examination process, including the frequency of examinations, the administration announced May 12. Metsger, who was appointed May 2 to replace former NCUA Chairwoman Debbie Matz, outlined his plans to review the examination process in a speech to the Idaho Credit Union League.
“We need to see how we meet our statutory responsibility to examine credit unions for safety and soundness with as small a footprint as possible,” Metsger said. “My No. 1 priority this year is to focus on continual quality improvement. Part of that is looking at our examinations. I want a thoughtful, thorough review of how we might reduce the time we spend onsite and the frequency with which we conduct examinations where performance standards for safety and soundness justify an extended cycle.
NCUA’s goal within the next two months is to remove the requirement that every federal credit union, and all federally insured, state-chartered credit unions with more than $250 million in assets, be examined each calendar year.
“This prescriptive requirement creates a logjam of exams at the end of each year, which is neither effective nor efficient,” Metsger said, adding that removing the calendar year requirement will not alter the general objective of examining credit unions every 12 months but is a necessary first step toward establishing an extended examination cycle for well-managed, financially sound credit unions.
Former NCUA Chairwoman Debbie Matz wrote in a letter to Rep. Frank Guinta (R-N.H.) in March that the soonest the agency would see exam cycle changes would be the end of 2017, as the 2016 exam cycle and budget already were in place and there was “a limited amount of organizational capacity to make such changes at this time.”
However, Metsger said that enhanced technology should enable NCUA’s examiners to collect more data without having to make onsite visits, benefitting both credit unions and NCUA's workforce.
Metsger said he also will form an internal working group, similar to the one that developed NCUA’s proposed field-of-membership rule, to hear from other stakeholders and make further changes to the examination process “sooner rather than later.”
According to the Credit Union National Association’s (CUNA) latest Credit Union Trends Report, credit unions picked up 820,000 new memberships in February. CUNA estimated that there were 6,187 credit unions operating in February, 11 fewer than January.
CUNA CEO Jim Nussle called NCUA’s announcement “very good news for credit unions.”
“Reducing the frequency of examinations for credit unions would remove some unnecessary pressure on credit union resources – resources that can better be used to serve members,” Nussle stated., “Such an action by the agency would also be both prudent and appropriate as it would refine the cycle to be more consistent with the examination cycle for banks. Reducing exam frequency is a top priority for CUNA. We have used our 360-degree advocacy approach, working with NCUA as well as federal lawmakers, to seek relief for credit unions on this issue. We thank Chairman Metsger for acting on this important issue just days after taking the reins of the agency.”
National Association of Federal Credit Unions (NAFCU) Executive Vice President of Government Affairs and General Counsel Carrie Hunt also welcomed Metsger’s announcement as a sign of progress.
“We appreciate Chairman Metsger’s response to our concerns about credit unions’ exam cycles and continue to urge the agency to implement a longer exam cycle as soon as possible,” Hunt said. “Healthy credit unions that have acted responsibly should not have to deal with such frequent exams, which are unnecessary and burdensome for the industry.”