The National Credit Union Administration recently sent out a guidance letter to credit unions regarding the agency’s supervisory priorities for 2017.
This letter, which is posted on the NCUA website and was sent to federally insured credit unions, is designed to assist credit unions as the prepare for their next NCUA examination. According to the letter, NCUA field staff will continue to use the streamlined small credit union exam program procedures for credit unions with assets up to $50 million and CAMEL ratings of 1, 2 or 3. For all other credit unions, field staff will conduct risk-focused examinations, concentrating on areas of highest risk, new products and services, and compliance with federal regulations, the letter stated.
In 2017, NCUA is implementing an extended exam cycle for some smaller credit unions with less than $1 billion in assets, as outlined in the NCUA letter Risk-Based Examination Policy.
According to the letter, NCUA’s primary areas of supervisory focus in 2017 include:
The NCUA will continue to carefully evaluate credit unions’ cybersecurity risk management practices, and encourages credit unions to use the Federal Financial Institutions Examination Council’s Cybersecurity Assessment Tool to bolster their security and risk management processes. The NCUA plans to increase its emphasis on cybersecurity by enhancing the examination focus with a structured assessment process, which it expects to complete in late 2017.
Bank Secrecy Act compliance
NCUA field staff are required to review credit unions’ compliance with the Bank Secrecy Act and to complete a related examination questionnaire at every examination. In 2017, NCUA field staff will focus on credit unions’ relationships with money services businesses and other accounts that may pose a higher risk for money laundering. Credit unions are expected to perform appropriate due diligence, analysis and monitoring when providing services to MSBs and other high-risk accounts.
Internal controls and fraud prevention
NCUA field staff will continue to evaluate the adequacy of credit union internal controls, as well as efforts to prevent and control fraud.
Interest rate and liquidity risk
On Jan. 1, NCUA field staff began using a revised interest rate risk supervisory tool and new examination procedures to assess interest rate risk management practices in credit unions. Field staff also will focus on the relationship between interest rate risk and liquidity risk.
NCUA’s revised Part 723, Member Business Loans; Commercial Lending became effective Jan. 1. NCUA field staff will evaluate a credit union’s commercial loan policies and procedures and assess the risk management processes associated with managing a commercial loan portfolio. Credit union officials should be prepared to provide documentation to support management’s ability to effectively monitor and manage its commercial loan portfolio.
NCUA field staff will evaluate credit unions’ compliance with the Military Lending Act, given changes to the act that have gone into effect recently as well as additional changes that will take effect in October. Field staff also review compliance with the Servicemembers’ Civil Relief Act.
To read the full letter, click here.