NCUA's Blueprint for Improved Operations to Benefit the Agency, Credit Unions, and Their Members

Board Message - NCUA Board Chairman J. Mark McWatters, NCUA Board Member Rick Metsger

Leadership, effectiveness, and efficiency are three key characteristics of any successful organization. The NCUA is no exception. That is why over the course of the last two years, the NCUA Board worked in a cooperative manner on a strategy to improve the way the agency operates, focusing on how we regulate, supervise, and function internally as an agency.1

Our overall strategy to improve the operations of the agency has produced positive results that translate into significant benefits for credit unions, credit union members, and the NCUA. And we have achieved these results without jeopardizing safety and soundness, undermining our ability to mitigate budget increases, or short-changing our legal responsibilities.

Much has been accomplished over the last two years as part of our efforts, which include:

  • Outlining an agenda for significant regulatory relief;
  • Reviewing our space and staffing needs;
  • Revising our examination schedule;
  • Strengthening the National Credit Union Share Insurance Fund and distributing the excess equity to federally insured credit unions;
  • Modernizing the Call Report; and
  • Reviewing the bylaws for federal credit unions, among other regulatory efforts.

None of these changes could have been put into effect without the truly bipartisan support and collaboration of both NCUA Board Members. With a two-member board, regardless of who is Chair, neither can accomplish anything without the support of the other. With little room for error, making progress also requires ongoing coordination between our two offices and the support of the agency’s expert staff.

We are also keenly aware that removing rules or lessening the regulatory requirements for credit unions can create their own burdens if change means credit unions must make costly adjustments to their compliance programs to reflect those improvements. That is why the agency has been looking for, proposing, and implementing regulatory and supervisory changes designed to enhance credit union operations without imposing significant or costly new burdens in the process.

Under Chairman McWatters’ leadership, the Board proposed a plan for achieving meaningful regulatory relief that conforms to the goals of Executive Order 13777. This order directs executive branch agencies to set up a task force to identify rules that limit job creation, are outdated, impose excessive costs, create serious inconsistencies, or interfere with other regulatory reform initiatives. The agency’s proposal outlined a series of regulatory changes on such areas as loan maturities, the low-income designation, and alternative and secondary capital, among other areas. While we are still reviewing the comments received, this Regulatory Reform Agenda could potentially provide significant regulatory relief for credit unions.

As we look to improve the regulatory environment for credit unions, we are also looking to improve how the agency operates and carries out its critical safety and soundness mission. A broad review of both NCUA’s space and staffing needs carried out in 2017 resulted in a plan that reduces the agency’s regional structure from five to three regional offices—a reduction of 80 percent of our leased space—and reorganizes several of our central office functions to achieve both cost reductions and greater efficiency. This plan is being implemented now and it should be completed early next year.

We agree on the need to reduce the NCUA’s regulatory footprint. During Board Member Metsger’s term as Chairman, the agency developed and began implementation of the Exam Flexibility Initiative, which adjusted the frequency of our examinations based on a credit union’s size, complexity, safety, and, in the case of state-chartered credit unions, the frequency of state examinations. Well-managed and well-run credit unions will be reviewed less frequently, while problem institutions and credit unions we have not examined in years will be reviewed more frequently. This change in scheduling has resulted in meaningful regulatory relief for the vast majority of credit unions, led to greater coordination between federal and state regulators, and allowed us to focus more of our efforts on troubled credit unions—thus catching some problems earlier when they are easier and less expensive to resolve.

It is our responsibility to ensure the National Credit Union Share Insurance Fund remains strong. Since the end of the Great Recession, the Share Insurance Fund’s equity ratio has declined, primarily from strong growth in insured shares and reduced investment income resulting from a low interest-rate environment. The closure of the Temporary Corporate Credit Union Stabilization Fund and the transfer of its assets into the Share Insurance Fund, along with the increase in the normal operating level, have improved the Share Insurance Fund’s resiliency. It also made possible, as the agency announced earlier this year, a $736 million distribution to federally insured credit unions that will take place in the third quarter—money that can help credit unions provide their members with new products and services and make new investments in communities.

It also bears repeating had the NCUA Board not closed the Stabilization Fund and transferred its funds to the Share Insurance Fund, federally insured credit unions would have had to pay insurance premiums of approximately $1.3 billion.

By working together, we are also striking the right balance when it comes to what credit unions report to the agency. In modernizing our Call Report, we challenged our staff to undertake a comprehensive review to simplify the reporting process without sacrificing any important information necessary for our proper supervision and data analyses. We estimate the proposed changes will reduce the number of account codes in the Call Report by roughly 40 percent. If adopted, the schedules and instructions for the Call Report will be streamlined as well, making it easier for credit unions to complete this critical regulatory filing.

Our plan, once final changes are in place, is to begin implementation of the improved Call Report next year, likely after the first quarter, but with sufficient lead-time for both credit unions and the agency to adjust their processes with minimal impact on their operations. By consulting in advance with many of the third-party vendors credit unions use, we anticipate changes can be incorporated into regular system updates and costs can be minimized due to economies of scale.

While the comment period on the proposed Call Report prototype is closed, the types of questions we asked stakeholders to address reflect the kind of analyses we believe the agency and credit unions should consider when embarking on any regulatory initiative. They include:

  • Is this truly a reduction in the reporting or regulatory burden?
  • Are these rules or reporting requirements still pertinent today?
  • Are these instructions, rules, guidance, or reporting requirements logical?
  • Should our approach or requirements be expanded or reduced based on changes in the market place, consumer behavior or to accounting rules, among factors?
  • Are the instructions adequate?
  • How much time will credit unions need to adapt to these changes?
  • Are there other operational issues that may arise that we need to consider?

These important questions have influenced our most recent actions. The NCUA’s review of federal credit union bylaws has gone back to the basics with an advance notice of proposed rulemaking that reconsiders the purpose of the bylaws and examines how they can be revised to provide additional flexibility to credit unions. This includes considerations on how to accommodate new and developing technology, encourage members’ access to and participation in the governance of their credit unions, and facilitate board member recruitment and succession planning. We hope to develop a new proposal on the bylaws for federal credit unions to comment on in the coming months.

Additionally, we approved a final rule in April that removed the unnecessary requirement to include the official advertisement statement in very short broadcast ads and financial statements, and provided an additional and shorter version of the statement that credit unions can now use. In addition, we adopted changes to the capital planning and stress testing rule for the largest credit unions (those with more than $10 billion in assets) to tailor our rules according to those credit unions’ assets and resources.

For credit union members, the benefits of regulatory relief are more indirect but no less real. When credit unions experience a regulatory and supervisory environment that helps facilitate their operations, more of their resources can be channeled in to improved member services that reflect members’ needs and preferences, new growth opportunities, and new investments in communities.

The advantages to the NCUA of operating in an improved environment likewise cannot be overstated. They translate into better-tailored regulation and a better-managed examination and supervision program that allows the agency to focus its resources on isolated, acute safety and soundness problems and to identify significant, problematic trends that could affect the credit union system as a whole.

The agency’s operational, regulatory, and supervisory blueprint we have outlined is the foundation for our current and future efforts to help relieve credit unions’ regulatory burdens without reducing safety and soundness or legal compliance. When the NCUA Board works collaboratively and in a bipartisan or nonpartisan way, as we have been and will continue to do, real improvements for the agency, credit unions, and most of all, for credit union members can be achieved.


[1] This approach is evident in our strategic and annual performance plans, important documents credit unions should be familiar with because credit unions are both the object of our supervision and the source of the agency’s funding. You can access the plans, which the NCUA Board approved in January, here. As these documents make clear, our current blueprint to enhance the business environment for the agency and for credit unions will remain in effect throughout our tenure on the Board.