Developed by NCUA 2023 Priorities | Credit Union Times

NCUA official certification. (Source: NCUA)

On Wednesday, NCUA Chairman Todd Harper issued a letter to credit unions outlining the 2023 supervisory priorities for the agency’s testing program. The six sections focus on what is believed to be the greatest risk to members of the credit union, the Share Insurance Fund and the industry as a whole.

According to the book, the 2023 priorities including the following:

Interest Interest Interest Interest

“Interest rates were raised above the yield curve in 2022, increasing the risk of interest rates (IRR) and the link to income and capital,” the letter said. “This dramatic increase in rates has increased market volatility as credit union assets and liabilities are disproportionately valued, potentially affecting economic and credit union revenue estimates.”

Auditors will review the credit union’s IRR program for the following key management and control activities:

  • Key concepts and related data are relevant and well documented.
  • The general condition of the credit union’s IRR indicator is that it is well measured and controlled.
  • The results are communicated to decision makers and the Board of Directors.
  • Actions are taken to remain within established safety and quality limits.

Water hazards

According to Harper’s letter, the researchers will review the credit union’s policies, procedures and risk limits. The auditors will evaluate financial management in the following ways:

  • Potential effects of interest rate changes on asset market value and borrowing capacity.
  • Examples of financial risk models, including movements of members’ shares (for example, changes from basic investments to more sensitive information).
  • Model models for changes in cash flows for an appropriate range of factors (eg, changes in initial velocity).
  • Adequacy of contingency funding plans to cover any unexpected shortfalls.

Credit risk

Due to high inflation and rising interest rates, NCUA investigators will evaluate the “effectiveness of current loan programs, any adjustments made by your union lending to lending standards and monitoring financial conditions, and ways to implement loans for borrowers who are facing financial difficulties.”

The letter added, “NCUA examiners will carefully consider all factors to evaluate your credit union’s efforts to provide relief to borrowers, including whether the efforts are reasonable and conducted with good governance and management control.”

Fraud Prevention and Detection

NCUA investigators will continue to review internal fraud controls and segregation of duties through 2023.

The agency launched a new management questionnaire this year to help credit unions identify fraud and other risks that can help protect the Share Insurance Fund.

“The question will be sent to credit unions in the pre-examination setting for all full-exams along with the Power Factors List. required, including joint examinations with State Examination Authorities (SSAs),” the letter said. “Credit unions only have to fill out one question on the test. If the SSA uses a similar questionnaire, federal and state agencies will coordinate tests to determine which questionnaires the credit union completes to reduce. don’t double it again.”

Data Protection

Harper’s letter highlighted cybersecurity as a top priority in 2023 and asked credit union leaders to “remain vigilant” in adapting and responding to threats on the internet.

“Investigators will consider whether credit unions have established data protection programs to protect members and the credit union,” the statement said. the book.

Consumer Financial Protection

Compliance with consumer protection laws, related to federal credit unions, will be another area of ​​focus for NCUA investigators this year. With a list of things to investigate that includes compliance with the Disaster Prevention Act and disclosure requirements “as we continue to improve our understanding of the financial impact of credit unions, representatives credit unions, and the Share Insurance Fund.”

The book highlighted the following areas that candidates will focus on:

  • Additional programs.
  • Fair lending, including reviewing residential property appraisals for any bias.
  • The Truth About Lending Law.
  • The Fair Financial Reporting Act.

Harper’s letter emphasized that testing will continue to be flexible when testing and supervision are conducted on-site and off-site. “The examiners will continue to conduct some off-site examinations as long as they can be completed effectively and efficiently at credit unions that can use the work abroad,” the letter said.

READ MORE: NCUA’s 2023 Supervisory Priorities letter.

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