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NCUA - Areas at which examiners will be looking.

ALEXANDRIA, Va.–When it comes to credit risk, credit unions were offered insights from NCUA on areas at which examiners will be looking, forbearance extension reporting, plans that need to be developed, and even the neighborhoods in which CUs might want to hand out their business cards.

Those issues and others were addressed during a webinar hosted Wednesday by the agency.

Victoria Bennett, senior credit specialist in NCUA’s Office of Examination and Insurance, emphasized the agency wants to know what credit unions will be actively doing regarding the institution’s credit risk.

“We want to see your documentation on it. Who, what, when, where, why and how,” said Bennett. “Document what you have going on. We are going to want to know how strong your capital and earnings are. If you are dealing with high credit risk, your capital and earnings is what’s going to carry you through.”

In addition, Bennett said the agency will be monitoring any credit unions getting into what it believes to be high-risk endeavors.

“If it sounds too good to be true, it probably is,” she said. “We are concerned we could have credit unions who might be suffering and then they are looking to get fast income. The new programs that you get into, if they are higher risk, they need to be well documented. I'm not telling you not to get into new programs, but you do need to document when you are doing that.” 

Planning

Bennett stressed that by having a plan the credit union will be in better shape to deal with problems if they arise.

“For example, the plan could state that when delinquencies reach a certain amount, you will have an outside company take over the short-term delinquencies,” she said. “And if your losses reach a certain (higher) level you will start doing this, this, and this. Maybe you will reduce expenses to protect capital.”

What a prudent plan of action does is allow the credit union to assemble sound processes at a time when management is not stressing over the situation, which can then be effectively employed if needed.

“Hopefully this will avoid you getting into the situation of hoping, hoping, hoping, and then it gets worse and you can’t get out of it,” she said. “I hope none of you get into that situation, but a plan is a good way to protect yourself.”

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