MARLBOROUGH, Mass.—In a letter to the Cooperative Credit Union Association, NCUA has reiterated its position that it will not be moving away from the 12-month exam cycle anytime soon.
As CUToday.info reported here, NAFCU also received a similar response when it called on NCUA to move to an 18-month exam cycle.
The NCUA letter to the Cooperative CU Association, which represents credit unions in Massachusetts, Rhode Island and New Hampshire, followed an earlier letter from CCUA CEO Paul Gentile who urged the agency to begin a dialogue with the credit union system on returning to an 18-month exam cycle for well-run credit unions. In his letter Gentile noted the ability for the agency to leverage existing data to better spot trends at any time, not just during an exam cycle, and the need for NCUA to find ways to control exam costs.
The CCUA said the response from NCUA said the issue needs further dialogue, but that the agency’s systems would require significant technological improvements to better use data to analyze trends without being on-site at a credit union. Key to that evolution would be a change to the AIRES system, stated NCUA in the letter.
“The platform AIRES is built on is at the end of its life cycle. Therefore, NCUA must invest in updating this platform to maintain its functionality, and for the past year has been identifying the requirements and specifications to achieve this. In updating AIRES, we can leverage new technology and techniques to make the exam process more efficient and effective,” said Larry Fazio, director, Office of Examination and Insurance. “The new AIRES would integrate the secure file solution (portal) slated to be deployed in early 2016. If funding is approved by the NCUA Board, the new AIRES will enable examiners to conduct more examination steps off-site, reducing on-site time at medium to large credit unions by as much as half. This will increase the quality of exams, lower travel costs, reduce any disruption for credit unions caused by exams, and improve the quality of life for examiners,” Fazio stated.
The CCUA said that Fazio also noted that NCUA has had challenges with the quality of Call Report data, especially during the 18-month exam cycle.
“Having said that, in 2016 the agency plans to begin evaluating a comprehensive reorganization of the Call Report. The goals of this reorganization are to streamline the Call Report for credit unions not involved in complex activities, eliminate data no longer needed, and expand the data collected to address increasing authorities of credit unions as well as to support improved off-site supervision,” wrote Fazio.
Gentile said he appreciated NCUA’s acknowledgement that better data could lead to less exam time on-site.
“I applaud NCUA’s recognition of data for an improved exam experience and appreciate their detailed response. It’s clear the agency believes on-site examination is still its most effective tool for safety and soundness,” Gentile said in a released statement. “We believe the agency needs to evolve for the good of the system and find ways to leverage data for better ongoing analysis, not just during the on-site exam cycle. Just-released second quarter data show that only 1% of insured shares are in CAMEL 4 and 5 credit unions. The number of troubled credit unions is at an historic low, yet the agency still maintains a 12-month cycle for all credit unions. More flexibility is needed in the exam cycle duration to ensure the agency can better use resources in those credit unions that need it, and well-run credit unions experience less disruption from lengthy annual exams.”