CUNA Chief Compliance Officer Jared Ihrig provided an overview of NCUA examination priorities during a breakout session at the co-located CUNA Technology Council and CUNA Operations and Member Experience Council Conferences in Chicago.
Among the agency's top examination priorities:
►Bank Secrecy Act (BSA) compliance. NCUA will conduct more in-depth reviews on BSA and anti-money laundering policies, procedures, and processes related to requirements for customer due diligence and identification/verification of beneficial owners of legal entity members, Ihrig says.
The agency is looking closely at the enhanced customer due diligence requirements that went into effect May 11, 2018.
►Concentrations of credit. Examiners will focus on large concentrations of loan products and concentrations of specific risk characteristics. The agency considers concentration risk to be any single exposure or group of highly correlated exposures that have the potential to produce losses large enough to threaten a credit union’s health or ability to maintain its core operations.
►Consumer compliance. NCUA is focusing on reporting violations related to Home Mortgage Disclosure Act (HMDA), Ihrig says. Reviews will account for partial exemptions from S. 2155 that became effective May 24, 2018.
Reviews will evaluate “good faith efforts” to comply with 2018 HMDA data collection and reporting requirements.
►Current Expected Credit Loss (CECL). This regulation goes into effect Jan. 1, 2022, for most for most credit unions, although the Financial Accounting Standards Board proposed delaying implementation until Jan. 1, 2023.
Ihrig says examiners will ask questions about how credit unions are preparing for the new accounting standard, and whether they have analyzed how CECL will impact allowance for loan and lease losses account funding needs. He says to expect more guidance and clarity from NCUA in coming months.
►Information systems and assurance. NCUA will use the Automated Cybersecurity Assessment Tool (ACET) in their examinations of credit unions with $250 million and more in assets in 2019, and that will be expanded even further in coming years. Security, confidentiality, and integrity of member information remains a key supervisory priority for NCUA, Ihrig says.
►Liquidity and interest rate risk. In 2019, examiners are focusing on:
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