Examination & Supervision
2012 Update
Chairman's Statements on Supervision
“NCUA will not sacrifice safety and
soundness as we work to help the credit
union industry recover in the coming
years.”
January 2011
“NCUA will remain focused on due
diligence and risk management…NCUA
will continue to encourage responsible
lending.”
January 2012
What is Safety and Soundness?
• Management and Officials Understand Risks
• Accurate and Timely Financial Data
• Sound Internal Controls / Effective Audits
• Active Supervisory Committee
• Efficient Operations / Operating Expense Controls
• Written Policies that Reflect Actual Practices
• Realistic Budget and Strategic Plan
• Communication and Transparency
Today’s Topics
• National Supervision Policy Manual
• Examination Questionnaires
• Credit Union Online (NCUA 5300)
• NCUA Assessments
• Fraud Risk Indicators in Credit
Unions
National
Supervision
Policy Manual
• Two years in development
• Collaborative effort by NCUA staff at all levels, all Regions
• Thorough internal review and comment process
• Provides for uniform supervision of CU’s nationwide
• Includes more rigorous follow-up process
6
National Supervision Policy Manual
Implementation Timeline
• Field use began January 2012
• Examiner training - pilot
January through June 2012
• Agency-wide policy
Mid-year 2012
National Supervision Policy Manual
Table of Contents
District
Management
FCU Program
and
Procedures
FISCU Program
and
Procedures
Quality
Assurance
Program
Audits
Recordkeeping
Fraud
Waivers
Credit Union
Service
Organizations
Small Credit
Union Program
Prompt
Corrective
Action
Other Regulatory
Actions
Bank Secrecy
Act
Enforcement
Administrative
Remedies
2012 Examination Scope
Minimum Review Requirements
Resolution of Prior DOR Items
Loans - Concentrations, High Risk, Insider, Extensions, Share
Concentrations = in relation to Assets and NW
Allowance For Loan and Lease Losses
SC Activities, Audit (Audit Work Papers)
File Maintenance Reports
Bank and Corporate Account Reconciliations (Testing)
Strategic, Business, and Marketing Plans
2012 Examination Scope
Required Questionnaires
BSA – Bank Secrecy Act *
Loan – Participation Loans
IC – Financial Triggers
Loan – Flood Act *
Loan - Controls
IC – Cash *
5300 Review *
Loan – Real Estate – IC
Red Flag Questionnaire *
SC Audit and Verification *
Loan – Indirect Lending – IC
Foreclosure Procedures
Interest Rate Risk – A
Loan – Sub-Prime – IC
Third Party Relationships
Interest Rate Risk – B
Loan – Home Equity– IC
Credit CARD Act
Interest Rate Risk – C
Loan – Business Loans– IC
SAFE Act
Interest Rate Risk – D
Loan – SBA– Parts I and II
Liquidity – A
Share – Controls
IT - Website and E-banking *
Liquidity – B
Share – Internal Controls
IT - FFIEC Authentication *
Liquidity – C
Third Party Relationships
Investment Controls (New)
IC – Lines of Credit
Unlawful Internet Gambling
Enforcement Act 2006 (UIGEA)
Examination Questionnaires
Examination Questionnaires
• AIRES
Automated Integrated Regulatory Examination
System
• All AIRES Questionnaires are posted on
NCUA web site
• http://www.ncua.gov/Resources/CUs/Pages/AIRES.aspx
13
Examination
Questionnaires
(full screen shot of web page)
14
Examination Questionnaires
Demonstration
15
CU Online – Version 2
• Silverlight must be installed to access CU Online
• Website to install:
http://www.microsoft.com/getsilverlight/GetStarted/Install/Default.aspx
• System Requirements
 Windows
• Operating System: Windows 7, Windows Vista; Windows XP Service Pack 3
• Intel® Pentium® III 450MHz or faster processor (or equivalent)
• 128MB of RAM
 Mac OS
• Operating System: Apple Mac OS X 10.4.8 or above
• Intel Core™ Duo 1.83GHz or faster processor
• 128MB of RAM
CU Online – Version 2
•
•
•
•
User Interface updated
Security improvements
View only screens display all checkboxes
Programs/Services categorized like the paper
form
Current
Version
New
Version
CU Online – Version 2
• Profile Certification
Required quarterly to submit Call Report
Certify Profile button appears anytime changes are
made, and when quarterly certification is due
Users can make several changes to the profile and
then certify
• Must certify to permanently save all changes to the NCUA
• Changes will be lost if the user logs off or leaves the profile area without
certifying
CU Online – Version 2
• Warnings in the Profile
– Implemented to help improve data integrity
– Warnings must be commented on prior to
certification (similar to call report process)
– Will not prevent profile certification
CU Online – Version 2
• Profile Snapshot taken each quarter when the
Call Report is submitted
– Permanent record of the profile for the quarter
– Ability to print as a PDF
CU Online – Version 2
• Eliminated edit and delete functionality on
Regulatory and IS&T pages
– Can only add a date
– Sections impacted:
•
•
•
•
•
financial statement audit,
member account verification,
annual meeting,
disaster recovery test, and
data processing conversion.
CU Online – Version 2
Current Version – CU Online
Version 2 – CU Online
Profile Changes:
Inability to print profile easily
Profile PDF on demand
Merger Partner Registry on General Tab
MPR on its own tab
Part 748 Certification on General Tab
Part 748 on Regulatory Tab
Call Report Changes:
Must click “Save” for calculations and
edits to refresh
Refresh during data entry
December 1990 – June 2009- no profile
fields on forms
All forms display profile fields
No easy way to print warnings
Ability to export to PDF or Microsoft
Excel
CU Online – Version 2
• Request FPR button
moved
– Used to obtain a 20
page FPR on a
submitted or validated
Call Report
New
Version
Current
Version
CU Online – Version 2
• Warnings: Compares Call Report and Credit
Union Profile
– Warnings identify potential reporting errors
– Displayed in the Call Report
– Do not backdate the profile to match call report
cycle date to remove the warnings
• Profile should always reflect current operations
CU Online – Version 2
• Added a CU Basic role
– View only permissions for your credit union
– Requested by CUs so they could give their Board
Members access to CU Online
– Optional for credit unions
More Information to Come…
• NCUA will host a webcast for credit unions to
provide more information prior to system
upgrades
• Email notification of Webcast
– CU Online Administrators and Users
– Call Report Contact
– Profile Information Contact
– Organizational email of the Credit Union (IST page
of profile)
Assessments - Perception
Assessments - Perspective
"The amount of the
assessments for the
national share insurance
fund really depends on the
industry's own
performance."
NCUA Chairman
Debbie Matz
Troubled CU Shares to
Total Insured Shares 2006 – 2011
31
Credit Union Failures
2002 - 2011
30
25
20
15
10
5
0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Assessments - Future
Fraud
• Credit Unions are
experiencing
higher losses due
to fraud
• Do you have a
Fraud and Ethics
Policy?
Fraud Failure Statistics 2004 - 2010
13 Fraud Related Credit Union Failures
Total Assets in
Fraud Failures
$ 330,263,481
Total Losses in
Fraud Failures
$ 252,641,813
Assets
Smallest CU
Largest CU
Average Loss to
Assets
76.5%
Loss
Loss/Assets
$972,266
$3,690,194
379.55%
$247,512,380
$187,834,226
75.89%
Fraud Losses – Common Traits
CU
Weak SC
Limited
Staff
Records
OOB
Audit / MAV
Lacking
Manipulated
Records
Trusted
Staff
A
X
X
X
X
X
X
B
X
X
X
X
X
X
C
X
X
X
X
X
X
D
X
X
X
X
X
E
F
G
H
I
J
K
L
M
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
NCUA Red Flag Questionnaire
37