18 Month Exam Cycle In Sight

The stars are aligning for NCUA to increase the exam cycle to eighteen months for well performing credit unions  perhaps at a quicker pace than I anticipated. Yesterday, NCUA sent out a request for credit unions to comment on the exam cycle by August 1.  Among the issues NUA would like credit unions to address are 1) How can NCUA conduct future examinations in ways that minimize their impact on credit unions’ operations?; 2) What concerns do credit unions have about the current examination and supervision program?; 3) What steps should NCUA take to improve the efficiency of its examination program while ensuring it remains effective?; 4) How can NCUA better use technology in examinations?; and 5) What metrics should NCUA consider to determine a credit union’s eligibility for an extended examination cycle.

The request comes in the aftermath of House Republicans highlighting the 18-month cycle as part of their financial reform proposal. After the proposal was unveiled, Chairman Rick Metsger dashed off a letter to House Financial Services Committee Chairman Jeb Hensarling reminding him that plans are already in the works for an extended exam cycle for financially sound well-managed CUs. He anticipates changes to be in place for the 2017 exam cycle.

The only potential fly in the ointment is that the NCUA Board could be without a quorum of two members when it comes time to finalize these plans.

Brexit Impacting Economy

Great Britain is experiencing its own spasm of political lunacy and, if it doesn’t come to its senses, will impact the economic environment in which you operate. On June 23^rd Britain will hold a referendum on leaving the European Union and polls put the Pro Brexit camp ahead by as many as six points.  No one knows precisely what impact a divorce would have but considering how sluggish the EU already is, that England is a relatively strong economy and that London is a center of world finance, we are starting to see people looking around for safer places to put their money until the dust settles. Yesterday, the yield on the German 10 year bond fell below zero.  Investors were willing to pay approximately eight cents for every thousand dollars of bonds they brought.  Expect similar pressure to be placed on US securities if our Anglican Forbearers don’t come to their senses in time.