NCUA Releases 2014 Exam Focus

The National Credit Union Administration has released Letter to Credit Unions 14-CU-02, which covers the focus topics for 2014 examinations.

In 2014, NCUA will be working to ensure that credit unions identify and mitigate forward-looking risks before those risks threaten the viability of credit unions and the stability of the Share Insurance Fund. The NCUA field staff will be looking for evidence that credit unions are managing potential risks on the balance sheet, in technology, and in new loan product portfolios.

Interest Rate Risk

Interest rate risk is the most significant risk the industry faces right now. As rates have risen above record lows, many credit unions’ unrealized gains have swung to unrealized losses. These unrealized losses may foreshadow the actual losses credit unions will face if continuing rate increases eventually result in more compression of net interest margins.

It is imperative for credit unions to make the necessary adjustments to account for a rising rate environment. Even a slow, gradual increase in rates could have significant consequences for credit unions with high concentrations in certain long-term investments and loans. NCUA will be working to ensure credit unions are mitigating any inordinate exposure.

Cybersecurity Threats

As credit unions adopt new technology to meet member service needs, they and their members are exposed to a growing volume and sophistication of cyber attacks. The global interconnectedness of today’s networks raises operational risks and exposes credit unions of all sizes to cyber criminals and cyber terrorists who have acquired programs to compromise data, steal identities, block transactions, and crash financial systems.

NCUA field staff will evaluate credit unions’ ability to assess and mitigate cyber-security risk and respond to cyber attacks. Credit unions of all sizes will be expected to implement appropriate risk-mitigation controls — including vendor due diligence, strong password processes, proper patch management and network monitoring — to better prevent, detect, and recover from cyber attacks.

Money Services Businesses (MSBs)

Credit unions that maintain account relationships with MSBs, or are considering doing so, need to be aware of the potential risks involved — particularly with regard to money laundering. Without proper controls, MSBs may generate transaction volume that could overwhelm a credit union and cover up illegal activities.

Field staff will be scrutinizing credit unions’ relationships with MSBs, looking to ensure that credit unions are in compliance with Bank Secrecy Act requirements with regard to MSB member accounts.

Private Student Lending

Private student loans are the fastest-growing product in the credit union industry. Defaults may not appear on the books for the first four years, but these private loans are not backed by the full faith and credit of the U.S. government.

Because of the increased risk, NCUA field staff will evaluate each credit union’s student lending plans, policies, controls, and third-party due diligence. Credit unions offering student loans through third parties must carefully investigate the originators and any insurer as well.

New Requirements

The NCUA field staff will also be looking to assess credit unions’ compliance with new rules and regulations, which include:

  • Loan Participation Rule
  • Ability-to-Repay and Qualified Mortgage Standards
  • Credit Union Service Organization (CUSO) Rule


Questions? Contact the Compliance Hotline: 1.800.546.4465,

Posted in Compliance News, NCUA.