NCUA Board Delays Reopening Plan; Seeks Comments on Increasing Virtual Examinations

As the coronavirus crisis drags on, the National Credit Union Administration board announced at its Thursday meeting that it will delay its phased-in reopening of the agency and approved a plan to explore expansion of virtual examinations of credit unions.

NCUA officials had said last week that they would begin a phased-in reopening of the agency as early as July 6. That plan would have included the resumption of on-site examinations of credit unions. Agency staff members currently are not working in NCUA offices.

“This is, indeed a highly fluid situation,” Chairman Rodney Hood said, during Thursday’s board meeting, adding that credit unions and staff will be given “ample notice” before the agency reopens its offices.

Board member J. Mark McWatters said that the most likely scenario is another wave of the highly infectious virus, adding that the agency should “follow the science. It is imperative not to put our NCUA staff at risk.”

The NCUA board also approved a plan to seek information on the expansion of virtual exams of credit unions.. Examiners have been conducting virtual exams during the pandemic. Normally, 83% of an exam is conducted on-site, according to agency staff.

In the proposal for virtual exams, which will be published in the Federal Register, the agency states that during the pandemic, examiners have successfully performed many elements of the examination process off-site.

“In support of the ongoing examination modernization initiatives, the NCUA anticipates adopting an examination model that enables examiners to review a credit union’s operational and financial condition from an alternate worksite, such as a home office,” the agency said.

In the notice, the NCUA asks what capabilities the agency needs to accomplish that goal without compromising its safety and soundness responsibilities. “This modernization effort could reduce the regulatory burden and establish technology options that would make it easier for credit unions to provide services to these underserved communities and populations”.

During the meeting, the board also was briefed on the agency’s annual Minority Depository Institution report. In 2019, 514 credit unions, or about 10% of federally insured credit unions, were Minority Depository Institutions, according to the report. Last year, 20 MDIs merged into other credit unions.

McWatters said he is dismayed by the notion that MDIs are “disappearing,” adding that the institutions cannot operate at the economies of scale demanded by financial services consumers. “The problem, of course, is that maintaining these sophisticated financial services in a secure environment requires the deep pockets that most MDIs simply don’t have,” he said.

McWatters suggested that the NCUA could wear the “slightly unorthodox hat of matchmaker” and could offer introductions to an array of struggling MDIs with compatible fields of membership.

Board member Todd Harper said that the agency board should continue to push for increased funding for the NCUA’s Community Development Revolving Loan Fund and should increase contact with MDIs. “The agency should ramp up its outreach,” he said.

The NCUA board also approved the interim distribution of $171 million to 900 credit unions that had invested in guaranteed notes to help the agency weather the collapse of corporate credit unions during the last decade.


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