News
Expect Changes to NCUA Exam Report Come January 1 — 12/12/13
Long awaited changes that will streamline credit union examination reports and improve the overall exam process will be introduced on Jan. 1 according to the NCUA. The agency outlined the changes in a letter to credit unions (13-CU-09) on October 8.
What Changes is NCUA Making to the Examination Report?
Specifically, the Document of Resolution (DOR) and Examiner’s Findings will now be standalone documents. Separating the DOR and Examiner’s Findings documents – and providing descriptive definitions of each document’s purpose – will help credit union officials clearly differentiate between major and minor problems in order to prioritize corrective actions. For any material problems identified in an exam, the examiner’s concern and documented support for that concern will be included in the DOR, along with corrective action plans. This will help credit unions and NCUA implement timely problem resolution of the most critical and material concerns. These changes will also enhance consistency in the exam process.
More specifically: DORs will include a description of material problems, along with the agreed-upon corrective actions. Ideally, the DOR will include corrective action plans developed cooperatively between examiners and credit union officials for concerns of the highest priority. Failure to correct problems documented in the DOR may result in enforcement actions, and will impact CAMEL and risk ratings. Examiner’s Findings will include less urgent problems the credit union must address, but can do so in the normal course of business. Management may use its own discretion to determine the timeframe and approach for correcting these problems; however, we expect management to address concerns documented in the Examiner’s Findings within a reasonable timeframe. Unresolved Examiner’s Findings will impact CAMEL and risk.
What Changes are Being Made to the Examination Process?
In addition to streamlining and clarifying the examination report documents, NCUA is implementing new processes related to issuing and following up on the examination report. Relevant chapter revisions to the NSPM are attached for further information. If a DOR instructs your credit union to cease an activity your examiner identifies as unsafe or unsound, the examiner will instruct you to notify the NCUA Regional Office in writing once you have implemented the necessary corrective action to enable your credit union to resume the activity in a safe and sound manner.
Examiners are now required to follow up with credit union officials on outstanding DOR items within 120 days after the timeframe for completion has passed. This means examiners will contact you shortly after the timeframe for DOR resolution to verify compliance. This will help ensure timely resolution of identified problems.
The revisions to Chapter 13 of the NSPM highlight our long-standing policy that credit union management should be involved in the development of corrective action plans. As examiners identify concerns, you should be ready to provide solutions. The goal is to use management’s preferred strategies to solve problems if they possess a reasonable chance of success. Thus, reasonable solutions provided by the credit union will become the corrective action plan included in the DOR. Working together to proactively identify problems and reasonable solutions will ensure credit unions continue to serve their members and operate soundly.
The NCUA stressed that the examination changes reflect input NCUA received from various stakeholders over the past 24 months. Once implemented, this modernization will further improve the overall exam process by setting clearer expectations for credit unions and examiners, as well as streamlining paperwork and ensuring consistency the letter went on to explain.