NCUA Issues Supervisory Disaster Guidance for CUs

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In light of the significant number of credit unions affected by major disasters in 2017, including hurricanes, flooding, and fires, the National Credit Union Administration (NCUA) issued supervisory guidance (established jointly with other federal regulators) that examiners should follow as they assess the financial and operational condition of federally insured credit unions that have been directly affected by an event that results in a presidential declaration of a major disaster.

The guidance highlights both the importance of examiner flexibility in addressing issues faced by affected credit unions and the critical need to accurately portray their financial and operating condition. The guidance also encourages examiners to retain flexibility in their follow up supervisory plans, given the unique and long-term nature of the problems these institutions face.

Click here for the Supervisory Letter No. 17-02 and the Interagency Examiner Guidance.

NCUA's Supervisory Priority's for 2018

In case you missed it during the holiday rush and vacations, the NCUA published its list of supervisory priorities for 2018. This is an early gift as the agency usually publishes this list in January. See Letter to Credit Unions No. 17-CU-09.

The NCUA identified the following seven areas for supervisory focus in 2018: Cyber-Security Assessment, Bank Secrecy Act Compliance, Internal Controls and Fraud Prevention, Interest Rate and Liquidity Risk, Automobile Lending, Commercial Lending, and Consumer Compliance.

  • Cyber-Security Assessment: The NCUA says this remains a key focus and that they will begin using their Automated Cybersecurity Examination Tool (ACET) in examinations of credit unions with over $1 billion in assets. The ACET aligns with the Cybersecurity Assessment Tool (CAT), developed by the FFIEC for voluntary use by banks and credit unions, that the agency has been referencing for the past couple of years.
  • Bank Secrecy Act (BSA) Compliance: As always, the agency will review for BSA compliance, and in the second half of the year they will begin assessing compliance with the “Customer Due Diligence Requirements for Financial Institutions” that become effective May 11, 2018. These rules include a new requirement to identify and verify the identity of beneficial owners of legal entity customers, subject to certain exclusions and exemptions.
  • Internal Controls and Fraud Prevention: Examiners will continue to evaluate the adequacy of credit union internal controls as well as overall efforts to prevent and detect fraud.
  • Interest Rate and Liquidity Risk: Examiners will continue to use the revised interest rate risk supervisory tool and examination procedures to assess interest rate risk management practices in credit unions. (See NCUA Letter to Credit Unions, 16-CU-08, Revised Interest Rate Risk Supervision.) Examiners will also increase their focus on liquidity risk management practices citing emerging trends related to on-balance-sheet liquidity.
  • Automobile Lending: Examiners will apply additional scrutiny on loan portfolios with the following concentrations: loan maturities greater than seven years; high loan-to-value; near-prime or subprime; and indirect lending programs.
  • Commercial Lending: The NCUA’s revised regulation for Member Business Loans; Commercial Lending went into effect January 1, 2017. Examiners will continue to focus on the credit union’s commercial loan policies and procedures along with assessing the effectiveness of the credit union’s risk management processes. (See NCUA Letter to Credit Unions, 16-CU-11, Member Business Loans Guidance Added to Examiner’s Guide.)
  • Consumer Compliance: Beginning in the second quarter, examiners will perform limited reviews of quarterly Loan/Application Registers (LAR), when applicable, to evaluate federal credit unions’ good faith efforts to comply with the CFPB’s revised Home Mortgage Disclosure Act (HMDA) rules. The NCUA’s review of 2018 HMDA data will be diagnostic in nature, designed to help credit unions identify compliance weaknesses in collecting 2018 data for submission in 2019, and will credit good faith compliance efforts. The NCUA does not intend to cite violations for data errors found in the quarterly LARs, nor require data resubmission unless data errors are material. Furthermore, the NCUA does not intend to assess penalties with respect to errors in data collected in 2018 and reported in 2019.
  • Examiners will also evaluate credit unions’ efforts to comply with the Military Lending Act’s restrictions against the use of certain contract terms, as well as the credit card provisions for which compliance began in October 2017.
  • Examiners will also review credit union’s overdraft policies and procedures for compliance with Regulation E.


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