NASHVILLE, Tenn.-Saying it is seeking to better allocate resources to address areas of greater risk, NCUA will introduce the Office of National Examinations and Supervision, Jan. 1, 2013.

NCUA Chairman Debbie Matz made the announcement during NAFCU's Annual Conference, telling attendees the new office will oversee the nation's largest natural-person credit unions-those over $10 billion in assets-and also assume supervision of corporate credit unions. Just four natural-person CUs are larger than $10 billion in assets: Navy FCU, Pentagon FCU, North Carolina State Employees' CU and BECU. But with just $10 billion in reserves, the NCUSIF could be devastated by a failure of one of the large CUs.

The move follows NCUA's recent announcement that FCUs at the other end of the asset spectrum, those below $10 million with CAMEL ratings of three or better, will receive shorter annual exams and streamlined exam reports under the agency's Small Credit Union Examination Program.

"It's clear that we need to enhance the supervision of the largest credit unions," said Matz, who pointed out that CUs above $500 million control 63% of all credit union assets but receive only 19% of NCUA exam hours.

Matz further noted that CUs below $50 million in assets represent just 7% of all CU assets-and thus less risk to the National Credit Union Share Insurance Fund-but those CUs currently receive 45% of exam hours.

 

Move Part of a Reorganization

The Office of National Examinations and Supervision represents a reorganization of existing resources, shared Matz. "This reorganization establishes a single office dedicated to the challenges of supervising the largest credit unions, promoting consistency of exam practices. In addition, it will leverage national and regional expertise to promote high-quality evaluations of risk and risk-management practices."

The new office will utilize existing resources as best possible, shared Matz. "The current staffing level at NCUA will be sufficient to support the realignment. All staff in the Office of National Examinations and Supervision will be cross-trained to examine and supervise both consumer and corporate credit unions."

Matz pointed out that the reorganization is reallocating examiner resources from smaller CUs to larger credit unions. "This means examiners will be spending less time in well-performing small credit unions. Currently, we're reducing exam hours in credit unions under $10 million in assets."

Matz reminded that NCUA is not "turning our backs" on small CUs. "We are convinced we can provide the same level of diligent oversight even more efficiently." But Matz also told Credit Union Journal that smaller credit unions should be pleased with the lighter examination process they will see moving forward.

 

More Consultative Approach

Matz said the Office of Small Credit Union Initiatives will take on a more consultative role. NCUA's economic development specialists will be working as strategic planning consultants, providing a wider range of assistance. Matz said the new office has been two years in the making and is the result of feedback from credit unions and from NCUA's internal Systemic Ris Working Group.

The four natural-person CUs and the corporates were alerted to the new Office last week, with NCUA confirming it had set up conference calls with three of the four CEOs at the natural-person CUs to discuss the plan. Examiners will not be based on-site at any of those CUs, Matz said. NCUA also plans to meet with state regulators for the two CUs affected, State Employees in North Carolina and BECU in Washington.

Given the elimination of investment powers of corpoates by regulators, Matz said it was "hard to justify a standalone office" dedicated to corporates. The new Office of National Examination and Supervision will be overseen by Scott Hunt. The Office will "hire specialists" as needed, Matz said.

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