NCUA Provides Exam Schedule Updates | 2022-01-18

The NCUA’s latest letter to credit unions (22-CU-02) provides credit unions with an update on the agency’s review programs. It also covers the NCUA oversight priorities for 2022.

NCUA Connect & MERIT

In 2021, the NCUA trained all NCUA and state regulator users on its new examination platform, the Modern Examination and Risk Identification Tool (MERIT), and associated systems.

Credit unions will use the new MERIT platform and its related systems in their reviews. The NCUA has allocated time for examiners to work with credit unions on how to use these new tools in 2022.

Recording of official meetings

As noted in the NCUA Examiner’s Guide, “credit unions may record their meetings” (exit conferences and joint conferences). Officials must seek the examiner’s consent before recording the meeting, to which the examiner must normally agree.

Credit unions should refer to local, state, and federal laws and consult legal counsel before recording conversations, particularly regarding requirements for obtaining consent from affected parties.

Also in accordance with the Examiner’s Guide, “the examiner has the discretion to request that a copy of the recording or a transcript be sent to him”.

Camels Update

The NCUA finalized a rule in October that added the “S” (for Market Sensitivity) component to the existing CAMEL rating system and redefined the “L” component, thus updating the CAMEL rating system to CAMELS.

Adoption of CAMELS enables the NCUA, state supervisors, and federally insured credit unions to achieve greater transparency in ratings and to clearly distinguish liquidity risk in the “L” component and sensitivity to market risk captured in the “S” component, according to NCUA.

The final rule is in effect for exams beginning on or after April 1, 2022.

The valuation of the “S” component reflects the credit union‘s exposure to changes in its earnings and capital position resulting from changes in market prices and interest rates. Effective risk management programs include comprehensive interest rate risk policies, appropriate and identifiable risk limits, clearly defined risk mitigation strategies and an appropriate governance framework.

When assessing the “L” component to determine the adequacy of a credit union‘s liquidity profile, reviewers will consider current and potential sources of liquidity against funding needs. The adequacy of liquidity risk management is also assessed against the size, complexity and risk profile of a credit union.

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