NCUA Outlines Plans to Significantly Reduce Time Spent on Call Reports

By CUToday.info02.12.2018

Credit unions should be spending less time on call reports in the future.

NCUA reported it is moving forward with a modernization effort it says will reduce the number of data fields on its call report by 40%. The NCUA board was told at its January meeting by agency staff that even the most complex credit unions will not need to dedicate as much time and resources to filling out the reports.

According to Larry Fazio, director of NCUA’s Office of Examination and Insurance, the Call Report and Modernization effort has focused on the need to reduce the size and complexity of call reports where possible, to reorganize schedules into more logical groups, to reduce overlap, and to simplify instructions.

NCUA first announced the initiative in May of 2016 when the board discussed how changes to NCUA’s data collection practices might enhance off-site monitoring and pre-exam planning, as well as reduce time demands on credit unions. In June of 2016 NCUA published a Request for Information in the Federal Register and accepted comment for 90 days, and since that time has met with a number of stakeholders within the credit union community on how it might improve the call report.

All of that feedback has been used by NCUA’s Enterprise Solution Modernization team, which is also seeking to move NCUA away from on-site exams in favor of virtual exams.

How Reductions Achieved

At its January meeting, NCUA staff told the board it has been able to make the 40% reduction in data fields by simplifying the derivatives fields, streamlining lending-related data collected, reducing information for shares, liabilities and off-balance sheet items, and through simplifications.

Agency staff said the prototype call report calls for the retirement of approximately 1,000 account codes and the addition of 400. NCUA’s internal systems do not allow for account codes to be replaced.

The single largest reduction comes from reducing several pages related to derivatives, which staff acknowledged applies to only a subset of credit unions. But even beyond those the prototype reduces account codes by 20%, staff said.

All of account code changes in the prototype are documented and will be posted on the NCUA website, staff said.  

The prototype also reflects the pending changes to Current Expected Credit Losses (CECL). For CUs adopting CECL in 2019, the call report will allow them to make the switch. Once CECL is fully implemented, legacy accounting codes will be retired, according to NCUA.

Overall, depending on the size and complexity of a credit union, it will see a reduction of between 38% and 48% in account codes, NCUA said.

Input Being Sought

With the update on its progress, NCUA said it is now seeking input on how long credit unions believe they will need to prepare for the changed call reports. Fazio said NCUA has needs to make a number of back-office changes, and that even the most discreet changes reflected in the prototype won’t be in place until March 2019 at the earliest.

Pressed by NCUA Chairman J. Mark McWatters on whether the new prototype will be appropriate as NCUA seeks to move to virtual exams, Fazio said it’s a “balancing act” the agency has worked to effectively conduct and that he believes the reforms will meet the agency’s needs for the next five to seven years.

“What do you say to the average CU that says ‘the call report we have today, maybe it’s a little overkill, but my computer is set to this and my staff knows how to do it and you’re turning the apple cart upside down. Where is the benefit?’” asked McWatters.

“We specifically asked in the Federal Register notice, ‘Do you think this be a burden to you?’” responded Fazio. “The loud and clear message we got was ‘This needs to be streamlined and needs to be improved.’ Having said that, for some CUs the change is going to be an issue. But the belief is over the long term this will have significant benefit for the industry.”

Reprinted with permission from CUToday.info, a leading source of news and resources for credit union decision-makers.