A Direct Line Blog

By Donya Parrish, MCU VP Risk Management

Last week, NCUA issued its annual Supervisory Priorities letter. That’s important to you as board members because not only does the letter start “Dear Boards of Directors and CEOs,” it also gives a glimpse into the topics that the NCUA believes will pose the highest risk to your members, the credit union industry, and the National Credit Union Share Insurance Fund this year.

The agency also noted the letter was meant to “assist credit unions as they plan for this year.” While you may have already set strategic goals for the upcoming year, reviewing any plans in the context of NCUA’s focus could be critical. The resources provided under each discussion are relevant, timely, and worth bookmarking.

The topic leading the Balance Sheet Management list — and possibly on it for the first time — is lending. NCUA sees asset quality deteriorating and overall delinquency rates and losses at their highest point in over a decade. They said both the management of credit risk concentrations and third-party vendors could further contribute to concern.

Interest rate risk and liquidity remained on the list again this year — no surprise, and also should not be ignored. The complexity and rapidly evolving payment system were also discussed. Cyber threats and risk exposures in these complex systems were noted as credit unions fight to evolve to meet consumer expectations.

There was little surprise that fraud prevention and detection were listed as a priority. We have had a huge increase across the industry in fraudulent schemes and losses in recent years, even with additional focus, education, and detection tools in place. The letter said NCUA “will review its examination procedures to ensure internal control and other review areas align with the ever-changing fraud landscape,” so clearly not all fraud is coming from external sources.

My suggestion is to take the time to read the letter, evaluate it in terms of your own credit union’s priorities, and discuss the board level about any risks you see that require additional attention or mitigation.