Region II Report
THE 12-MONTH EXAM CYCLE—
IMPACT ON THE FIELD
In 2008, the NCUA Board modified the risk-based exam
scheduling program to an annual exam program with full
implementation required by this month. The annual exam
program’s goal is for all federal credit unions and federally
insured, state-chartered credit unions with more than $250
million in assets to receive an exam once every calendar year.
To reach this goal, NCUA expanded its examiner force.
The overarching reason for the move to an annual exam
program was to mitigate risk to the National Credit Union
Share Insurance Fund. As seen with the recent economic
cycle, individual credit union and aggregate industry trends
can drastically change over an 18-month period. For
example, while examiners can readily see growth patterns and
rising delinquency during offsite reviews of Call Reports and
financial performance reports, they cannot determine the
quality of a credit union’s risk management processes,
underwriting, lending personnel or risk rating systems. Unless
examiners perform onsite reviews to assess asset quality in
the early stages of new or expanding lending programs, credit
unions with aggressive growth plans or limited knowledge
can rapidly jeopardize their net worth.
Earlier identification of potential problems gives examiners
more opportunity to work with credit union management to
resolve problems. The annual exam program also provides
opportunities for credit union officials to ask their examiner
what best practices they are seeing in other credit unions, and
have more in-person discussions about new regulations.
Examples include the Secure and Fair Enforcement for
Mortgage Licensing Act of 2008 (SAFE Act) and the
Unlawful Internet Gambling Enforcement Act (UIGEA). In
other words, less time between exams gives the district
examiner and credit union management the chance to build
a stronger working relationship.
Finally, NCUA examiners are working more frequently with
state examiners as NCUA increases its presence in larger,
federally insured, state-chartered credit unions as well. This
collaboration can only serve to strengthen and reduce the
overall risk to the Share Insurance Fund.
NCUA BOARD APPROVES 5. 1 PERCENT BUDGET INCREASE FOR 2012 (FROM PAGE 1)
Mindful of the cost to credit unions, the budget process strove
to cut costs wherever possible. All requests were vetted to
ensure the appropriate balance between protecting credit
unions and restraining costs.
The most significant budgetary changes are related to the
agency’s collective bargaining agreement and to examination
travel. The collective bargaining agreement makes the
employee benefits package comparable with the other federal
financial regulatory agencies. Budget estimates related to
travel for examinations increased to reflect additional work
done in credit unions.
The 2012 budget includes 33 new positions, of which 26 slots
directly support examination-related activities. Newly
authorized staff members include specialists in lending,
capital markets, information systems, supervision, and
Under the capital budget, the primary expense relates to
leasing laptops for NCUA and State Supervisory Authority
staffs. The agency replaces computers every three years to
keep pace with advancing technology.
Additionally, Chairman Matz announced NCUA would not
collect an NCUSIF premium for 2011 and also reduced the
projected NCUSIF premium to 0– 6 basis points for 2012.
This reduction results from NCUA’s ongoing efforts to
mitigate risks to the NCUSIF. The initial projection
announced at the special open Board meeting Aug. 29 was
0– 7 basis points.
The NCUSIF premium is based on variables that include
insured share growth, investment income, insurance loss
expense and the NCUSIF equity level.
The Corporate Stabilization Fund considers borrowed funds,
cash flows and affordability. NCUA reaffirmed the projected
range of 8–11 basis points for the Corporate Stabilization
Fund assessment necessary in 2012.
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