The NCUA released its 2023 supervisory priorities and other updates to the agency’s examination program. These priorities focus on areas that pose the highest risk to credit union members, the industry, and the National Credit Union Share Insurance Fund (Share Insurance Fund). Below are the NCUA’s primary areas of supervisory focus in 2023. 

  • Interest Rate Risk – In 2022, interest rates elevated the interest rate risk (IRR) and the related exposure to earnings and capital. This significant rise poses a risk to credit unions because a credit union’s assets and liabilities do not reprice equally, which could potentially impact net economic values and their projected earnings. NCUA’s examinations will review IRR programs for the following key risk management and control activities: 
    • Key assumptions and related data sets are reasonable and well-documented. 
    • 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. 
  • Liquidity Risk – The higher interest rates as discussed above have also caused a slowdown in prepayments for some loans and investment holdings resulting in reduced cashflows. Examiners will be reviewing credit union liquidity policies, procedures, and risk limits and will be evaluating the adequacy of the credit union’s liquidity risk management framework relative to the size, complexity, and risk profile. A credit union’s liquidity management will be assessed by evaluating: 
    • The potential 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 appropriateness of contingency funding plans to address any plausible unexpected liquidity shortfalls. 
  • Credit Risk – High inflation and high-interest rates increase unemployment rates affecting borrowers’ ability to pay loans and outstanding debt. Examiners will review the soundness of existing lending programs, any adjustments your credit union made to loan underwriting standards and portfolio monitoring practices, and loan workout strategies for borrowers facing financial hardships and will carefully consider all factors in evaluating your credit union’s efforts to provide relief for borrowers, including whether the efforts were reasonable and conducted with proper controls and management oversight. 
  • Fraud Prevention and Detection – The NCUA will be implementing a questionnaire this year designed to enhance the identification of fraud red flags, material supervisory concerns, or other potential new risks to which credit unions may be exposed. 
  • Information Security (Cybersecurity) – Credit unions’ cybersecurity programs should be evolving and adapting to the persistent cybersecurity risk and increased complexity of technology-related operating systems. Examiners will evaluate if credit unions have established adequate information security programs to protect members and the credit union. The NCUA has also developed new Information Security Examination procedures that will be used this year tailored to institutions of varying size and complexity. 
  • Consumer Financial Protection – The NCUA will continue to review compliance with applicable consumer financial protection laws and regulations for federal credit unions that they have under its consumer financial protection supervision authority. Examiners will also review your credit union’s compliance with Flood Disaster Protection Act requirements, including disclosure requirements, as the impact of climate-related financial risk on credit unions, credit union members, and the Share Insurance Fund evolves. Other areas examiners will focus on include:  
    • Overdraft programs. 
    • Fair lending, including review of residential real estate appraisals for any bias. 
    • The Truth in Lending Act. 
    • The Fair Credit Reporting Act. 

The NCUA also highlighted other updates including the following:  

  • Current expected credit loss implementation. 
  • Succession planning. 
  • Support for small credit unions and minority depository institutions. 

These supervisory priorities and other updates can be found here.