NCUA’s Examination Modernization Initiatives

Regulation computer screen logo

On Aug. 6 the National Credit Union Administration (NCUA) issued Letter to Credit Unions No. 18-CU-01 that provided an update on the five initiatives in process to improve and modernize how the agency conducts examinations and supervision. These initiatives include:

Flexible Examination Pilot Program (FLEX): FLEX is a pilot program in Region IV that is evaluating conducting offsite certain existing exam procedures. This program reflects the NCUA’s most immediate solution to reducing, but not eliminating, onsite presence during exams. The pilot identified the need for the NCUA to have a secure file transfer portal to support much of the work being done offsite efficiently. The secure file transfer portal was fully deployed in July 2018. The agency is currently testing the portal and can soon move towards developing plans to increase agency use of offsite procedures.

Office of National Examinations and Supervision (ONES) Data Driven Supervision: The ONES initiative is an effort to move to a continuous supervision model for the large natural person credit unions. The continuous supervision model will use data-driven analytics to monitor and identify credit union risk and support the transition to credit union-driven stress testing.

Shared NCUA-State Regulator Federally Insured, State-Chartered Credit Union (FISCU) Program: The Joint NCUA-State Supervisor Working Group (working group) is tasked with collaborating to improve coordination and scheduling of joint exams, provide scheduling flexibility, reduce redundancy where possible, and to evaluate the efficacy, appropriateness, and feasibility of adopting an alternating examination approach for FISCUs.

The working group is developing a pilot program to explore and evaluate the effectiveness of the alternating examination concept. A pilot will allow the NCUA, state regulators, and stakeholders to evaluate benefits and challenges prior to finalizing a decision on an alternating exam program. Such a pilot will need to run about three years in order to evaluate one full alternating exam cycle.

Enterprise Solution Modernization Program (ESM): The ESM program will replace legacy applications such as the examination system (AIRES) and the Call Report data collection tool (CU Online). ESM will also introduce emerging and secure technology that support the FLEX and Virtual Exam programs. The first of a series of technology upgrades from ESM are scheduled to begin in 2019.

Virtual Examination Program: In 2017, the NCUA Board approved the project and associated resources to research methods to conduct offsite as many aspects of the examination and supervision processes as possible. By identifying and adopting alternative methods to remotely analyze much of the financial and operational condition of a credit union, it may be possible to significantly reduce the frequency and scope of onsite examinations. The virtual examination team will deliver to the NCUA board by the end of 2020 a report discussing alternative methods identified to remotely analyze aspects of the financial and operational condition of a credit union. The agency’s goal is to transform within the next 5 - 10 years the examination and supervision program into a predominately virtual one for credit unions that are compatible with this approach.

For more details on each of these initiatives, see NCUA Letter to Credit Unions No. 18-CU-01.

Pin It