ALEXANDRIA, Va.—NCUA is sharing an update on its examination programs in its latest Letter to Credit Unions (22-CU-02).
In 2021, the agency reported it trained all its examiners and state regulator users on its new examination platform, the Modern Examination and Risk Identification Tool (MERIT) and associated systems.
Credit unions will be using the new MERIT platform and its related systems during their examinations, with the agency saying it has allocated time for examiners to work with credit unions on how to use these new tools during 2022, the agency said.
Recording of Official Meetings
The letter notes the NCUA’s Examiner’s Guide states, “credit unions may record their meetings (exit conferences and joint conferences). The officials should ask for the examiner’s concurrence before recording the meeting, a request to which the examiner should normally agree.”
In addition, NCUA said credit unions should refer to local, state, and federal laws, and consult with legal counsel prior to recording conversations, especially as it relates to any requirements to obtain consent from the parties involved.
Also consistent with the Examiner’s Guide, “the examiner has the discretion to request that a copy of the recording or a transcript be sent to the examiner,” the letter notes.
CAMELS Update
As CUToday.info reported, NCUA finalized a rule in October that added the “S” component (for Market Sensitivity) to the existing CAMEL rating system and redefined the “L” component, thus updating the CAMEL rating system to CAMELS.
Adoption of CAMELS allows the NCUA, state supervisory authorities, and federally insured credit unions to achieve greater transparency in the ratings and clearly distinguish between liquidity risk in the “L” component and sensitivity to market risk captured in the “S” component, according to NCUA.
No April Fool’s
The final rule is effective for examinations starting on or after April 1, 2022.
“The evaluation of the ‘S’ component reflects the credit union’s exposure to changes in its earnings and capital position arising from changes in market prices and interest rates,” NCUA stated. “Effective risk management programs include comprehensive interest rate risk policies, appropriate and identifiable risk limits, clearly defined risk mitigation strategies, and a suitable governance framework.”
In addition, the agency said that in evaluating the “L” component to determine the adequacy of a credit union’s liquidity profile, examiners will consider the current and prospective sources of liquidity compared to funding needs. The adequacy of liquidity risk management is also evaluated relative to a credit union’s size, complexity, and risk profile.
The letter also covers NCUA’s supervisory priorities for 2022 (see related story).