NCUA Chairman Todd M. Harper Statement on the NCUA’s Modernized Examination Tools

As Prepared for Delivery on November 18, 2021

Thank you, Kelly and Amber, for providing an update on the NCUA’s modernized examination tools, as well as an overview of MERIT’s applications and training resources. I commend the entire team in the Office of Business Innovation for their steadfast efforts over the last several years in managing this significant technological transition for the NCUA.

Since joining the NCUA Board, I have often noted that three of the main tenets of my regulatory philosophy are that the NCUA should be innovative, forward-looking, and risk focused. Just as the world changes and the credit union industry evolves, the NCUA must also adapt to marketplace and technological developments.

That is exactly what we are doing through the deployment of the new Modern Examination and Risk Identification Tool, or MERIT for short, and its associated systems, which together will modernize the agency’s examination, data collection, and reporting efforts.

The NCUA began transitioning to MERIT and its related applications in August. This new tool leverages technological innovation to ensure the continued safety and soundness of the credit union system. It also streamlines examination processes, which in turn helps to protect credit union members.

As we begin using MERIT, the agency will discontinue using AIRES, the examination system that has served us well over the last quarter of a century. Much has happened technologically since 1995 when the agency first deployed AIRES. Broadband, wi-fi, cloud computing, smartphones, tablets, and virtual assistants have all come into being during the last 25 years.

And, each of these tools has profoundly altered the way we live, regulate, and conduct personal financial transactions. Likewise, much has changed throughout the credit union industry since 1995. In the 1990s, many credit unions were making the transition to greater automation and electronic records and using dial-up internet to meet their members’ financial needs.

In contrast, sophisticated credit unions now provide remote deposit capture, online banking, and mobile apps to their members. And, some have even begun to deploy machine learning and other forms of artificial intelligence in their operations.

With so many changes in the way that credit unions and the NCUA operate taking place since 1995, it makes sense that MERIT is completely different than AIRES and that it will change everything we do in examinations, from how we manage workflow and request documents to how we evaluate a credit union’s performance and prepare and deliver exam reports. And, MERIT and its related systems will give us new analytical capabilities that both examiners and credit unions will appreciate.

Before I close, Kelly and Amber, I do have several questions. First, what are the most important things for a credit union to do to migrate successfully to the new MERIT exam system?

Thank you, that’s important information for credit unions to know. And, one of the questions I often hear from credit unions is whether the new data transfer portal is secure. Would you tell us more about the cybersecurity safeguards built into the portal system?

Thank you for clarifying that information. Another question I have is, if a credit union would like the NCUA to conduct more of the examination and supervision process virtually, how can MERIT help?

Thank you for that advice. And, how are credit unions working with their vendors to adjust to the implementation of MERIT?

Last question, how will MERIT help examiners from duplicating document requests to credit unions?

Thank you very much for this helpful information. That concludes my remarks. I now recognize Vice Chairman Hauptman.