NCUA Updates CUs During 'REACH'

L-R: Rick Metsger, board chairman for the National Credit Union Administration (NCUA); Mike Radway, chief of staff to the chairman; and Cherie Freed, director of Region V

Last week nearly 100 credit union leaders heard from National Credit Union Administration (NCUA) Board Chairman Rick Metsger, Chief of Staff to the Chairman Mike Radway, and Director of Region V Cherie Freed during a special breakout session at the California and Nevada Credit Union Leagues’ annual convention in Las Vegas—“REACH.”

Metsger addressed several topics of interest in his trademark open and candid manner. It’s been a leadership style many in the industry have found refreshing coming from the NCUA.

Radway reviewed in detail the new Field of Membership (FOM) rules, which will be effective 60 days from the date published in the Federal Register.

Cherie Freed discussed trends in Region V, noting that the region has a strong average 10.8 percent net worth and strong loan growth in all lending categories. Freed noted the region is fully staffed in the area of specialists, with five capital market specialists, nine regional lending specialists, and five regional information systems officers (RISOs). Freed also said NCUA is beginning to look closely at indirect lending as delinquencies and charge-offs on these loans are increasing.

While the official list of 2017 Exam Priorities will be issued by the agency in January, Freed gave the attendees a sneak peek of what the exam focus will likely include:

  • Cybersecurity—examiners will begin using the FFIEC Cybersecurity Assessment Tool (CAT) by year-end 2016.
  • Interest Rate Risk (IRR)—the agency recently issued Letter to Credit Unions No. 16-CU-08 regarding Revised IRR Supervision and released their new Examiner’s Guide, including updated guidance for IRR.
  • Member business and commercial lending—new rules effective January 2017.
  • Internal controls—fraud mitigation.
  • Military Lending Act (effective October 2016) and Service Members Civil Relief Act (SCRA).
  • Credit Union Service Organization (CUSO) reporting.
  • Overall governance and compliance with consumer protection regulations.

Metsger discussed the Exam Flexibility Initiative he established last May. The board will consider 10 recommendations made by the initiative’s working group during its Nov. 17 meeting when it will consider the agency’s 2017-2018 budget.

One of the most anticipated recommendations is an extended exam cycle for well-managed credit unions. Metsger said if the recommendation is approved by the board, it will benefit both the agency and credit unions and allow resources to be applied where needed, letting examiners visit some state-chartered credit unions that have not been visited in a long time, reducing travel time for examiners (which will hopefully lead to higher staff retention rates), and lessen the time examiners are onsite at qualifying credit unions. For more information on the recommendations and eligibility for extended exam cycles, click here.

Metsger also reminded attendees that the board received a briefing on the use of supplemental capital for risk-based capital (RBC) purposes in October and it is a very complex issue. The agency plans to issue an Advanced Notice of Proposed Rulemaking (ANPR) on the subject in January, and he encouraged attendees to provide comment on the ANPR as to how the use of supplemental capital can be deployed. For more information on the Supplemental Capital briefing, click here.

A video of the entire NCUA breakout session will be available soon to League-member credit unions.

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