Development Best Practices in Credit Union Supervision: Off-Site Supervision

This paper discusses off-site supervision, the objective of which is to quickly identify negative trends and emerging problems, and to resolve these issues before they become so serious that they may negatively affect the credit union's financial condition.

Off-site supervision includes:

• Data collection on balance sheets, income statements, breakout of delinquent loans, investments, external credit, savings, etc;
• Financial statement analysis, which allows the regulatory agency to measure and analyze the performance of the credit union over a period of time and compare it to other similar sized credit unions;
• Ratio analysis, which is effective in monitoring credit union performance and determining the presence of negative and positive trends and changes. The paper lists key ratios which determine a credit union's financial condition;
• Peer group analysis, which allow credit union managers and supervisors to compare their financial operations and results with similar credit unions.

The paper discusses the following important points about data collection:

• Data is collected using a standardized format;
• Individuals collecting data should be adequately trained to collect reliable data;
• Financial data can also be collected periodically.

The paper concludes by listing signs of warning that indicate existing or potential problems in the credit union.