CUNA shares exam improvements in letter to NCUA

March 24, 2016

WASHINGTON (3/24/16)--The National Credit Union Administration (NCUA) can take several steps toward making examinations less burdensome for credit unions, the Credit Union National Association (CUNA) told the agency this week. CUNA submitted a comment letter on the agency’s review of its regulations conducted under the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA).

The NCUA voluntarily participates in EGRPRA reviews, since the agency does not technically fall within the bill’s definition of “appropriate federal banking agency.”

Six sections of NCUA regulations were open for comment. The list and CUNA’s comments are:

  • Uniform rules of practice and procedure (12 CFR 747, Subpart A): “We believe a more formalized appeals process that provides clear points of entry in the examination should be provided for by the NCUA. The process should be independent and provide credit unions with the information used to make decisions in their examination prior to any substantive hearing on the matter;”
  • Lending (12 CFR 701.21): CUNA urges the NCUA to continue its payday alternative loan (PALs) program and to work with the Consumer Financial Protection Bureau to ensure the program is preserved and thrives. CUNA also noted that the PAL requirement that a loan recipient have a minimum membership of at least one month is “perhaps becoming obsolete and should be reviewed;”
  • Examinations (12 CFR 741.1): CUNA suggests the NCUA could do much more to utilize examinations conducted by state regulatory agencies;
  • Security programs (12 CFR 748.0): CUNA urges the NCUA to minimize compliance burdens relating to the Bank Secrecy Act (BSA), and urges the NCUA and other regulators to support legislative and regulatory changes to minimize costs and problems to meet BSA changes;
  • Guidelines for safeguarding member information and responding to unauthorized access to member information (12 CFR 748, Appendices A and B): CUNA asks the NCUA to consider expanding guidance included in Appendix B. Additionally, CUNA has concerns with the Federal Financial Institutions Examination Council’s Cybersecurity Assessment Tool being implemented as part of the examination process; and
  • Liquidity and contingency funding plans (12 CFR 741.12): The NCUA makes distinctions between credit unions with assets of $50 million and $250 million, and CUNA suggests the NCUA revisit those thresholds periodically.

CUNA also added a comment regarding the NCUA’s stated intentions to add an “S” (for sensitivity to market risk) to the CAMEL rating system and revise the “L” to reflect only liquidity issues.

“We urge the NCUA to consider the unique structure of credit unions when considering such a change. CUNA suggests interest rate risk, liquidity, and contingency funding are all interrelated and the current procedures under the existing ‘L’ and existing ‘M’ can adequately identify issues in a credit union,” the letter reads. “While we understand the supervisory guidance for those categories may need to change over time, it does not necessarily warrant the establishment of a new category under the CAMEL rating system.”