Virtual Examination Program

In 2017, the NCUA Board approved the project and associated resources to research methods to conduct offsite as many aspects of the examination and supervision processes as possible. The virtual exam project team is researching ways to harness new and emerging data, advancements in analytical techniques, innovative technology, and improvements in supervisory approaches.

By identifying and adopting alternative methods to remotely analyze much of the financial and operational condition of a credit union, with equivalent or improved effectiveness relative to current examinations, it may be possible to significantly reduce the frequency and scope of onsite examinations. Onsite examination activities could potentially be limited to periodic data quality and governance reviews, interventions for material problems, and meetings or other examination activities that need to be handled in person.

The virtual exam should lead to greater use of standardized interaction protocols, advanced analytical capabilities, and subject matter experts. This should result in more consistent and accurate supervisory determinations, provide greater clarity and consistency with respect to how the agency conducts supervisory oversight, and reduce coordination challenges between agency and institution staff.

To be successful, it is likely NCUA’s examination staff will need to analyze more information about the credit union and communicate more frequently with management. However, it is not the agency’s intent to intervene in credit unions’ day-to-day operations or strategic planning.

Currently, the project is in the research and discovery phase. During this phase, staff is identifying new and emerging data sources and methods to access the data, assessing advancements in analytical techniques, and considering how other technologies can be harnessed to automate or streamline various aspects of the examination process. Key activities to date include:

• Established and staffed new virtual examination program;
• Conducted outreach with internal and external stakeholders;
• Published a Request for Information in the Federal Register intended to solicit feedback and recommendations to guide the NCUA’s development of the project;
• Developed and implemented initial offsite procedures and guidance based on the Flexible Examination Pilot¹ results, many of which were utilized and further tested during the COVID-19 offsite posture;
• Catalogued examination scope steps which included a breakdown of the purpose of each exam step, explanation on how examiners complete the scope step, requirements for completing that step (for example, software, data, documentation, etc.), determination on whether or not the exam step could be performed offsite, and additional comments either highlighting non-standard details of each exam step or noting aspects of exam steps that need further review;
• Inventoried services, products, and activities a credit union could offer and then determined if the NCUA has examination steps or guidance to address each;
• Performed exploratory research on various solutions, technology, and new and existing data sources to determine practicality and feasibility for the virtual exam program; and
• Delivered a comprehensive interim summary report outlining activities, conclusions and next steps to the NCUA Board in early 2021.

As the team continues their efforts in the research and discovery phase of the project, they will perform periodic stakeholder outreach, conduct pilots and feasibility testing, and incrementally move examination activities offsite based on the results.