The Aug. 20 Credit Union Journal article, "NCUA Shoots Down NAFCU's Exam Schedule Suggestion, Despite State League Support," seems to intimate that NCUA will categorically reject NAFCU's recommendation regarding the implementation of an 18-months examination cycle before the ink is dry.

NAFCU strongly supports the industry's safety and soundness. Our recommendation for an 18-month examination cycle for federal credit unions determined to be "low risk" takes into account many critical risk factors and deserves serious consideration from the agency. In reviewing NCUA's newly-disclosed budget documents, NAFCU searched for constructive suggestions on how the agency can control costs without jeopardizing the industry's safety and soundness. Using NCUA's own metrics for determining the appropriate exam cycle, NAFCU considered the (1) current risk to the NCUSIF, (2) economic trends, and (3) NCUA staff and resource availability. We concluded in today's environment, "low-risk" credit unions do not warrant a 12-month exam cycle. We contend that an 18-month examination cycle would allow NCUA to better prioritize staff and resources towards addressing true risk in the system, while streamlining the time and money spent on low risk institutions.

Specifically, NAFCU believes that the risk present in today's credit union industry does not expose the NCUSIF to the possibility of substantial loss that would warrant an annual examination cycle.  In fact, the current percentage of shares held by CAMEL 4 and 5 credit unions is significantly reduced from 2008, when the agency implemented a 12-month program, as well as roughly in line with 2001-2007, when NCUA maintained an 18-month program.

In addition, NAFCU believes that today's environment warrants an 18-month examination cycle for "low-risk" credit unions because the economic trends and health of the NCUSIF compare favorably to 2001-2007 when NCUA employed a 12- to 24-month examination cycle.

In terms of the allocation of staff and resources, NCUA has already recognized the value of streamlining its examination resources through its Small Credit Union Examination Program, under which the agency has begun to reallocate agency resources from smaller, well-run credit unions, to larger, more complex institutions.  This targeted approach for financially and operationally sound federal credit unions with less than $30 million in assets supports the fact that NCUA has the flexibility to reduce its onsite presence while focusing on the critical areas of risk. NAFCU believes NCUA should extend this same technique to all well-run, healthy credit unions and implement an 18-month examination cycle for them.

Ultimately, NAFCU's recommendation for an 18-month examination cycle for federal credit unions  determined to be "low-risk" supports the industry's safety and soundness and deserves the benefit of NCUA's full consideration.

B. Dan Berger, President and CEO
NAFCU, Arlington, Va.