NCUA’s Alternating Examination Pilot Program May Lead to Decision Soon

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Beginning on January 1, 2019, NCUA and state supervisors from California, Florida, New Hampshire, Oklahoma, South Carolina, and Texas kicked off a pilot program aimed at reducing the regulatory burden of federally-insured, state-chartered credit unions (FISCUs).

NCUA and state regulators evaluated three means of conducting alternating examinations on credit unions:

  • Alternating lead—the NCUA and state regulators conduct joint examinations, alternating which agency serves as lead each cycle.
  • Alternating with limited participation—the NCUA and state regulators alternate conducting examinations with some involvement from the other agency.
  • Alternating—the NCUA and state regulators alternate conducting examinations independently.

The regulators ran the program for approximately three years to determine its efficacy, selecting a working group of credit unions based on CAMELS ratings, asset size, workload, and timing of examination cycles.

Speaking with NASCUS recently, NCUA Chairman Todd Harper said the agency is taking its insights and lessons learned to determine whether the project is worth formally adopting, and to what extent.

Per Harper, collaboration between federal and state regulators will be necessary as risk concerns grow for some financial institutions and an uncertain economy looms over the balance sheets of the nations’ credit unions.

He also renewed his concerns over the NCUA’s lack of oversight for CUSOs and credit union third-party service providers, a lack of authority Harper has lamented previously. Back in 2021, Harper spoke before the Senate Banking Committee urging for legislative changes to provide the NCUA with more regulatory powers, saying, “While there are many advantages to using these service providers, the concentration of credit union services within CUSOs and third-party vendors presents safety and soundness and compliance risk for the credit union industry.” His efforts to correct this “regulatory blind spot” have not resulted in any meaningful changes to date.

Author

  • Esteban Camargo

    As a supervising editor of CUSO Magazine, Esteban reviews and edits submissions, assists in the development of the publishing calendar, and performs his own research and writing. His experience provides CUSO Mag with a seasoned writer and content curator, able to provide valuable input to contributors, correspondents, and freelance journalists. Esteban has worked at CU*Answers since 2008 and currently serves as the CUSO's content marketing manager.

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