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CUNA Regulatory Comment Call

July 27, 2001

EXECUTIVE SUMMARY

• The National Credit Union Board is proposing to require all federally insured credit union to file quarterly call reports with NCUA.
• If adopted, the change would be implemented for the March 31, 2002 quarterly call report cycle.
• The proposal would amend the prompt corrective action rules (702.101(c)) to provide that credit unions would not be required to notify NCUA and the appropriate state agency, as applicable, of net worth changes under PCA.
• Comments are due to NCUA by November 1, 2001.
• For further information, contact CUNA Associate General Counsel Mary Dunn at mdunn@cuna.com or CUNA’s Senior Regulatory Counsel, Catherine Orr at corr@cuna.com.

HIGHLIGHTS

As part of the new Risk Based Examination Scheduling Program, the NCUA Board proposes to require all federally- insured credit unions regardless of asset size to file quarterly Financial and Statistical Reports with the agency. The Board believes that quarterly call reporting is a crucial component to facilitate the move to risk focused examinations. The proposed rule will have a 90-day public comment period. If the proposal becomes final, NCUA plans to implement the change for the March 31, 2002 quarterly call report cycle.

Currently, NCUA requires all federally insured credit unions with assets over $50 million to file a quarterly call report with NCUA. All other federally insured credit unions must file semiannually. Some credit unions under $50 million that are currently not required to file quarterly call reports may be eligible for participation in the extended examination cycle program. Requiring those credit unions to file quarterly reports is an essential part of their participation. This proposed rule would require some of the 8,600 or so federally insured credit unions that are below $50 million in assets now filing semiannually to file two additional call reports during each calendar year.

When credit unions comment on the proposal, Chairman Dennis Dollar urges them keep in mind the total impact of the proposed rule. NCUA’s Executive Director Len Skiles says there will be benefits for all federally insured credit unions as well as NCUA.

Some of the benefits for credit unions are expected to be:

• Based on an informal NCUA survey, it takes a federally insured credit union, on average, 6 hours to complete a call report. While all credit unions will not be eligible for the extended examination cycle, NCUA predicts that every other year qualifying credit unions (estimated to be 3,000-3,400) will save the considerable employee time taken up by the full examination process. This would be even more efficient in terms of report preparation time for credit unions in the seven states where the State Supervisory Authority (SSA) already requires all credit unions to file quarterly call reports.
• All federally insured credit unions will receive a quarterly Financial Performance Report.
• In conjunction with the change to quarterly call reports, NCUA is proposing to amend its Prompt Corrective Action (PCA) rule to eliminate the requirement to provide written notification to NCUA and any relevant SSA of a net worth change under PCA.

NCUA believes that quarterly call reports will result in improvements to its supervision program. Because the quarterly call reports will provide examiner staff with more timely information, examiners will have enhanced ability to detect emerging problems by monitoring the credit unions’ financial trends through the resultant Financial Performance Reports. Further, quarterly monitoring will permit NCUA to make better informed decisions about allocation of its supervision resources. NCUA projects that the quarterly call reporting program could have a net savings of approximately 52,000 hours of examiner time and reduce the risk of losses to the Share Insurance Fund.

NCUA has asked to work with CUNA to consider a simplified form for smaller federally insured credit unions. CUNA will send out a comment call on this quarterly call reporting proposal in the next several days.

QUESTIONS TO CONSIDER