Skip to main content

NCUA Identifies Supervisory Priorities for 2024

ALEXANDRIA, Va.–In a new Letter to Credit Unions, NCUA has outlined its supervisory priorities and other updates for its 2024 examination program.

The agency said the areas identified are those with the highest risk to credit union members and the insurance fund.

As CUToday.info has previously reported, growing financial strains and liquidity risks are cited by the agency, as well as the growth in the number of composite CAMELS code 3, 4, and 5 credit unions. 

The agency further noted:

NCUA 2
  • Its exam flexibility initiative will continue in 2024, extending the exam cycle for certain credit unions.
  • It will continue its Small Credit Union Exam Program in most federal credit unions with assets of $50 million or less.

Supervisory Priorities for 2024

Below is an overview of the areas where NCUA said it will focus its examinations this year:

Credit Risk

“Economic conditions continue to change the credit risk environment in the credit union industry, as inflation, high interest rates and borrowing costs, declining savings levels, and the end of pandemic-era stimulus and relief programs have negatively impacted some members’ ability to repay their debts. Credit unions’ loan portfolios expanded faster during 2022 than any year within the last 30 years, while aggregate loan performance began showing signs of deterioration in 2023,” NCUA said. 

Examiners will review:

  • Existing lending programs’ soundness
  • Credit union risk management practices, including any adjustments a credit union made to loan underwriting standards, portfolio monitoring practices, modification and workout strategies for borrowers facing financial hardships, and collection programs. 
  • Policies and procedures related to the Allowance for Credit Losses (ACL), documentation of the ACL reserve methodology, the adequacy of ACL reserves, and adherence to generally accepted accounting principles.

Liquidity Risk

The agency said pressure in deposit pricing and the use of wholesale funding is accelerating as alternative funding options, while new lending, participations, and loan sale markets may slow. In addition, member behaviors and risk relationships are also changing,  combining to create liquidity challenges and increased risk to earnings and capital.

“Increased liquidity risk and uncertainty heighten the need for credit unions to prepare for contingency funding needs. Section 741.12 of the NCUA’s regulations contains scaled credit union contingency funding plan expectations,” NCUA said. 

It noted that in previously released Letter to Credit Unions 23-CU-06, Importance of Contingency Funding Plans, adding an addendum to the 2010 Interagency Policy Statement on Funding and Liquidity Risk Management, reinforcing the need to adjust to changing market conditions. 

“In evaluating the “L” component of CAMELS to determine the adequacy of a credit union’s liquidity risk management framework, examiners will continue to consider the current and prospective sources of liquidity compared to funding needs,” NCUA said.

The agency said examiners will:

  • Review the credit union’s policies, procedures, and risk limits
  • Evaluate the adequacy of the credit union’s liquidity risk management framework relative to its size, complexity, and risk profile.

It will also continue to assess liquidity management by evaluating:

  • The effects of changing interest rates on the market value of assets and borrowing capacity.
  • Scenario analysis for liquidity risk modeling, including possible member share migrations (for example, shifts from core deposits into more rate-sensitive accounts).
  • Scenario analysis for changes in cash flow projections for an appropriate range of relevant factors (for example, changing prepayment speeds).
  • The cost of various funding alternatives and their impact on earnings and capital.
  • The diversity of funding sources under normal and stressed conditions.
  • The appropriateness of contingency funding plans to address any plausible unexpected liquidity shortfalls.

Consumer Financial Protection

The NCUA said it will continue assessing federal credit unions’ compliance with applicable consumer financial protection laws and regulations, including:

  • Overdraft Programs. In 2024, examiners will continue an expanded review of credit unions’ overdraft programs, including website advertising, balance calculation methods, and settlement processes. NCUA said it will also continue to evaluate adjustments credit unions made to their overdraft programs to address consumer compliance risk and potential consumer harm from unexpected overdraft fees.
  • Fair Lending. Examiners will review policies and practices for redlining, marketing, and pricing discrimination risk factors.
  • Auto lending. Examiners will review credit unions’ disclosures, policies, and practices to assess compliance with the Truth in Lending Act as implemented by Regulation Z. Examiners will also review credit unions’ policies regarding Guaranteed Asset Protection insurance.
  • Policies and procedures governing compliance with flood insurance rules.

Information Security/Cybersecurity

With cybersecurity, the agency said examiners will continue to assess whether credit unions have implemented robust information security programs to safeguard both members and the credit unions themselves. 

“Examiners will continue to utilize the information security examination procedures in 2024, ensuring a thorough evaluation of cybersecurity measures,” NCUA said. 

NCUA further noted it implemented a new Cyber Incident Notification Reporting Rule, effective Sept. 1, 2023, mandating federally insured credit unions swiftly — within 72 hours — notify the NCUA after the credit union reasonably believes that a reportable cyber incident has occurred. 

Credit unions should also notify the NCUA if a third-party provider experiences a cyber incident affecting the credit union.

NCUA said key steps to consider when implementing the reporting rule are found in the NCUA Letter to Credit Unions 23-CU-07, Cyber Incident Notification Requirements, and include:

  • Updating response plans
  • Reviewing third-party contracts
  • Training employees
  • Monitoring and documenting incidents.

Interest Rate Risk (IRR)

In evaluating the “S” CAMELS component, the agency said its examiners will continue to evaluate whether a credit union proactively manages its IRR and the related risks to capital, asset quality, earnings, and liquidity. In particular, NCUA said its examiners will review a credit union’s IRR program for the following key risk management and control activities:

  • Key assumptions and related data sets are reasonable and well documented
  • Back testing and sensitivity testing of the assumption set
  • The credit union’s overall level of IRR exposure is properly measured and controlled
  • Results are communicated to decision-makers and the board of directors
  • Proactive action is taken to remain within safe and sound policy limits.

Other Updates

In the Letter to Credit Unions, NCUA said additional updates include:

Bank Secrecy Act (BSA) Compliance

“A credit union’s deficiency in or failure to comply with the BSA’s programmatic, recordkeeping, and reporting requirements can pose a significant risk to the institution, its members, and the Share Insurance Fund,” NCUA said, adding it will provide updates to credit unions regarding any regulatory changes to the BSA throughout 2024, as well as updates to supervisory expectations and examination procedures. 

Support for Small Credit Unions and Minority Depository Institutions

In 2024, NCUA said it will remain committed to supporting and preserving small credit unions and minority depository institutions (MDIs) through its Small Credit Union and MDI Support Program (Support Program). Small credit unions and MDIs face unique risks and hurdles, and the NCUA will continue to offer custom support to eligible credit unions. 

“Credit unions with less than $100 million in assets and MDIs of all asset sizes are eligible and can request assistance through their examiner or regional office,” the agency said. “The NCUA recognizes the value small and MDI credit unions bring to members in underserved communities by offering access to safe, fair, and affordable loans and other financial products and services.”

According to NCUA, the benefits of this program are expected to include:

  • Expanded opportunities for qualifying credit unions to receive support through NCUA grants, training, and other initiatives
  • Furthered partnerships with organizations and industry mentors that can support small credit unions and MDIs
  • Added support to credit union management in addressing operational challenges.

The full letter, including links to additional resources, can be found here.

Comments

Post a Comment

Please no profanity or political comments.

Popular posts from this blog

The Case for Sharing a CEO Between Credit Unions

  Embracing Collaboration: The Case for Sharing a CEO Between Credit Unions In recent years, credit unions have faced numerous challenges, from regulatory pressures to evolving member expectations. As many seasoned leaders retire, smaller credit unions often find themselves at a turning point. In this landscape, one innovative solution is gaining traction: sharing a CEO between two credit unions. This approach not only addresses financial constraints but also fosters collaboration and enhances service delivery. The Rationale Behind Sharing a CEO 1. Financial Sustainability One of the most pressing concerns for small credit unions is maintaining financial health amid rising operational costs. A shared CEO model alleviates the financial burden of hiring and compensating a full-time executive. By splitting salary and benefits, both credit unions can allocate resources more effectively, allowing for investment in member services, technology, and community initiatives. ...
Post a Comment
Read Complete Article HERE>»

Reading Up On Recessions

  Reading Up On Recessions       Background Stemming from the Latin word “recessus” (meaning “a retreat”), recessions are  sustained periods  of declining activity in a country’s economy. During a recession, unemployment rises while economic output falls across a large swath of industries. Recessions are inevitable in modern economies, with one occurring about every six to seven years ( What causes recessions ?).   One common definition of a recession is when a country logs two consecutive quarters of shrinking gross domestic product, but in practice, ...
Post a Comment
Read Complete Article HERE>»

Sunday Reading - Landmine Rat Honored

  Landmine Rat Honored   Cambodia unveiled the world’s first statue honoring a landmine-detecting rat (w/photo) Friday. Magawa the rat lived to 8 years old and identified more than 100 landmines and other explosives from 2016 to 2021.  There are more than 100 African pouched rats deployed in landmine detection operations across the world. To identify mines, the rats are trained to sniff out explosive compounds like trinitrotoluene, or TNT. (The rats are not heavy enough to trigger detonation.) In Cambodia, up to 6 million landmines remain undiscovered, most planted during three decades of conflict, from the Vietnam War era through Cambodia's civil war . Since 1979, roughly 20,000 people have been killed in Cambodia, and roughly 40,000 wounded as a result of the mines. Magawa cleared more than ...
Post a Comment
Read Complete Article HERE>»

Sunday Reading - The gold standard, explained

  Gold Standard       The gold standard, explained A gold standard is a system where a country’s currency is pegged to, and can be converted into, a fixed amount of gold. It’s typically meant to create a sense of security in the country’s currency: When a government uses a gold standard , its currency can be exchanged for an equivalent amount of gold—although regulations around redemption vary by country.   After the Civil War, in 1873, America adopted the gold standard for the first time. At the time, if gold was priced at $100 an ounce, each dollar  rep...
Post a Comment
Read Complete Article HERE>»

Open Banking Pushes Leading Credit Unions Ahead In Race For Member Loyalty

  https://youtu.be/pUIV8hwSDCE NEW YORK—Credit unions that embrace open banking aren’t just keeping pace with competitors—they’re pulling ahead, new data show. A new report finds that innovation in digital tools and personalized experiences is emerging as the decisive factor separating credit unions that win lasting member loyalty from those at risk of losing ground. “ The 2025 Credit Union Innovation Readiness Index: Closing Gaps, Winning Members ,” a June report produced in collaboration between  Velera  and PYMNTS Intelligence, underscores innovation as a defining factor for credit union success. iStock-Korakrich Suntornnites “Facing shifting expectations from both consumers and small to medium-sized businesses (SMBs) toward digital convenience and tailored experiences, credit unions must modernize not just to compete with traditional banks, but to remain relevant to their members. The report, based surveys of 500 credit union executives, 15,000 U.S. consumers, and nea...
Post a Comment
Read Complete Article HERE>»

Long-Stalled Credit Card Competition Act Moves Forward In Senate Clarity Act Markup

WASHINGTON—A long-stalled bipartisan push to boost competition in the credit card market moved closer to becoming law late Friday, as Sens. Roger Marshall (R-KS) and Dick Durbin (D-IL) advanced a new amendment attached to the Senate Agriculture Committee’s markup of the Digital Asset Market Structure and Investor Protection Act, commonly known as the Clarity Act. Dick Durbin The amendment, a core component of the long-debated Credit Card Competition Act, would prohibit major credit-card networks and large issuing banks from enforcing network exclusivity on credit cards. Supporters argue the measure would expand transaction-routing competition, weaken the dominance of the largest payment networks, and reduce swipe fees that merchants say inflate consumer prices. The renewed momentum reflects President Trump’s recent backing of efforts to rein in credit card costs, a shift that has altered the political trajectory of legislation that has struggled to advance in prior Congresses. With Tru...
Post a Comment
Read Complete Article HERE>»

USPS Defends Banking Pilot, While Opponents Call It Illegal

  By David Baumann - July 11, 2022 Program has faced opposition from the outset, including from credit union groups, and has struggled to gain real traction. The U.S. Postal Service (USPS) argued this week that the controversial pilot program it is operating i...
Post a Comment
Read Complete Article HERE>»

Meet Spokane Firefighter Credit Union (SFCU) New President/CEO - Troy Clute

Meet SFCU's New President/CEO - Troy Clute  Troy Clute serves as the President and Chief Executive Officer of Spokane Firefighters Credit Union, bringing 29 years of experience in banking and finance. His career includes extensive leadership roles across the industry, with a strong foundation in consumer lending and member-focused financial services. Troy is a graduate of the renowned CUES CEO Institute Program, having earned the Certified Chief Executive (CCE) designation—one of the highest leadership credentials in the credit union movement. His leadership is defined by strategic vision, operational excellence, and a deep commitment to serving Spokane’s firefighter community and their families. Beyond his professional role, Troy values family above all. He and his wife, Karri, have been married for 36 years and share two grown children, Kellen and Kennadie, as well as three grandchildren—Tyus, Izze, and Major—who keep life joyful and full of adventure. When he’s not leading the c...
Post a Comment
Read Complete Article HERE>»

The impact of recent bank failures could impact credit unions.

The failures of Silicon Valley Bank (SVB) and Signature Bank, combined with the FDIC’s decision to cover all depositors could have an impact on credit unions. With over 93% of their deposits uninsured, SVB appears to be the poster child for poor strategic planning. The bank got caught short when the Fed raised rates. For credit unions, the real story is the decision to cover ALL accounts regardless of the amount in the account. Where is the threat to credit unions? Credit unions had no role in the failures of SVB and Signature Bank. The threat lies in the Treasury and FDIC’s decision to guarantee the funds in every account…no matter how much was in that account. While the Treasury Secretary and FDIC Chairman Gruenberg may have felt the need to do so to restore confidence, this action just kicks the can down the road. And the road will have no end if NCUA feels the pressure to do the same thing if a similar situation hits the credit union movement. Should there be a conservatorship or...
Post a Comment
Read Complete Article HERE>»