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NCUA Will Soon Decide Whether to Adopt Alternating Exams

By David Baumann - August 29, 2023

Agency has been conducting trial alongside six state credit union regulators.


The NCUA is close to a decision on whether to expand a pilot program in which the agency and state credit union regulators alternated exams at federally insured, state-chartered credit unions, agency chairman Todd Harper told NASCUS Sunday.

Speaking at the group’s State System Summit, Harper said a team that has been working on the pilot program has developed a list of lessons learned from the project. Based on those insights, he explained, the agency will decide whether to formally adopt the project.

Backstory and Context

In January 2019, the NCUA and six state regulators began testing a program to alternate examinations at federally insured, state-chartered credit unions. The regulators that volunteered to participate were the California Department of Business Oversight, the Florida Division of Financial Institutions, the New Hampshire Banking Department, the Oklahoma State Banking Department, the South Carolina Office of the Commissioner of Banking, and the Texas Credit Union Department.

Aim of the Program

The pilot was scheduled to last three years and designed to “provide insight into how an alternating examination program can improve coordination and optimize federal and state resources, while still maintaining the safety and soundness of federally insured, state-chartered credit unions.”

Additionally, the program aimed to evaluate the following alternating examination programs:

  • 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 limited involvement from the other agency. 
  • Alternating—the NCUA and state regulators alternate conducting examinations independently.

What Else Did Harper Say?

During his speech, Harper also renewed his call for Congress to enact legislation that would give the NCUA the power to examine third-party servicers used by credit unions.

“Unfortunately, CUSOs and credit union third-party service providers do not have the same level of oversight as bank vendors, because the NCUA lacks the statutory authority to examine or supervise these entities,” he said.

According to Harper, this “regulatory blind spot” poses many risks, including risks to the agency’s Share Insurance Fund, which, “in turn, could result in a direct cost to credit unions in the form of premiums.”

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