WASHINGTON -- The National Credit Union Administration plans to place full-time resident examiners in credit unions that have more than $1 billion of assets under a pilot program that will start within six to eight months.

Eight federally chartered credit unions could fall under the plan, including Navy Federal Credit Union, Merrifield, Va., the largest institution, with $8 billion of assets.

Similar Strategy at OCC

"We need someone in those credit unions continuously," said D. Michael Riley, director of examination and insurance for the agency. "It's hard to go in once a year and do an examination."

The move follows a similar strategy by the Office of the Comptroller of the Currency, which maintains resident examiners in the nation's largest banks.

Mr. Riley will oversee the program. He said a couple of institutions would be picked for the trial run. The institutions have not been chose, but initially only federally chartered institutions would be considered.

The proposal, which Mr. Riley says has been discussed for about 10 years, was in a report his office submitted to the agency's board in September. The report's title: "Strategies for the Year 2000."

Complications Cited

Mr. Riley said resident examiners are necessary because credit unions are becoming bigger and more complicated.

Keeping examiners on site could also result in fewer headaches for the agency and credit unions, Mr. Riley said.

"Instead of having 10 examiners in there for two weeks, we could spend less time in the aggregate [maintaining a resident examiner], and it would be less disruptive," he said.

No additional costs would be incurred, Mr. Riley said.

The pilot is expected to run for one year and then a decision would be made whether to continue it, Mr. Riley said. After a review, the agency may decide to place examiners in credit unions with assets of $500 million or more.

Team of Examiners

Mr. Riley said he expects each credit union under the plan to house a lead examiner and a back-up team of examiners. Resident examiners would be rotated from credit union to credit union on occasion.

The plan is an enhancement of the current practice in the six NCUA regions, where examiners check on the largest credit unions about once a month.

Mr. Riley said the program was suggested by some regional directors.

Thomas Hughes, president of Navy, isn't champing at the bit.

"Resident examiners get to be a pain in the neck," he said. "My personal feeling is it's not attractive and I'd rather not have it. But if that's their objective, I'd have to yield. They're the regulator."

Charles W. Filson, president of the Washington-based credit union consulting firm Callahan and Associates, said resident examiners aren't needed.

"I see no practical value in maintaining resident examiners," he said. Although keeping examiners in banks makes sense, "in a credit union context it's meaningless because the operations are much more understandable. It seems an inefficient use of examiner resources."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.