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NCUA takes steps to ease burden of on-site exams

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NCUA takes steps to ease burden of on-site exams

TheNational Credit Union Administration will spend more on technology as itcontinues to work toward a more sensible and relaxed on-site examinationschedule for credit unions.

Duringthe regulator's July 21 meeting, the board approved a proposed 5-year strategicplan that, among other things, will focus on upgrading technology and processesto improve exam quality while simultaneously reducing the on-site burden forcredit unions. Chairman Rick Metsger said those changes will require anup-front investment for hardware and software, but the long-term benefits willoutweigh the cost "many times over." The improvements will help theagency detect and defeat cyber threats to its own systems and to credit unions'systems, he said.

Thenew plan will also provide flexibility to the regulator's exam schedule.Metsger said the NCUA is currently bound by an inflexible calendar yearrequirement on top of a separate mandate that federal and state credit unionsbe examined every eight to 23 months. The rigidity of that requirement oftenforces the NCUA to cram exams into the last part of the year, even when theremay not be a safety and soundness reason to do so. And it also createslogistical problems for NCUA staff and the credit unions during a busy time ofthe year, Metsger said. The change will give staff ability to schedule examswhen they are needed and when they make the most sense "and not based onan arbitrary calendar year requirement," Metsger said.

Heemphasized that the change does not extend the exam cycle, although that couldhappen down the road.The proposed plan removes the requirement for examining certain credit unionseach calendar year starting in 2017, and some exams now scheduled for thefourth quarter of the year could be pushed to the first quarter of 2017.

NCUAboard member J. Mark McWatters singled out one particular strategy included inthe planthat urges the regulator to support the success of small credit unions throughtraining, consulting, grants and loans, partnership opportunities andresources. He said the U.S. is losing on average about one small credit unionper day and the NCUA has to do what it can to stop that. McWatters recounted avisit he had with a credit union in North Carolina a few months ago in whichthe CEO told McWatters that much of his time is spent helping the "poorfolks" portion of his membership. "And that's what small creditunions do," McWatters said. "That's our mandate."

McWatterssaid credit unions have to help those of modest means and those striving tobecome middle income, and in some respects the NCUA's Office of Small CreditUnion Initiatives is involved in the most important work that the regulatordoes.

Metsgersaid the primary goals of the regulator remain the same, but the new strategicplan reflects the fact that the agency is operating in a different financialworld than existed when the original plan was adopted. "The greatrecession has ended and new controls are in place over the corporate creditunion system," he said.