NCUA started using the Automated Cybersecurity Examination Tool (ACET) in 2018 to assess credit unions’ cybersecurity maturity.
Beginning in early 2020, credit unions will able to complete self-assessments using ACET.
Also new in 2020, NCUA will pilot new procedures to evaluate critical security controls during examinations between maturity assessments. These reviews will be scaled to the credit union’s size and risk profile.
LIBOR (London Interbank Offer Rate) is a reference rate commonly used in setting interest rates for adjustable or variable-rate financial products. Did you know its availability is not guaranteed beyond 2021?
Once it is no longer offered, the lack of guarantee could subject credit unions to increased material exposure and legal, financial, and operational risks.
Credit unions offer, own, and are counterparties to LIBOR-based products and contracts such as loans, investments, derivatives, deposits, and borrowings. Therefore, they’ll need to transition away from instruments using LIBOR as a reference rate.
As such, examiners will review credit unions’ exposure to LIBOR and planning related to its discontinuance. Examiners will use a LIBOR assessment workbook to:
NCUA’s letter also outlines how the agency has updated its examination program to reflect changes in:
• Commercial real estate appraisals. Effective Oct. 22, 2019, commercial real estate transactions below $1 million do not require appraisals by certified appraisers. Instead, credit unions may conduct a written estimate of market value or obtain an appraisal from a state-licensed appraiser.
The rule also increases standards for the qualifications and independence of individuals conduct written estimates of market value.
• Acceptance of private flood insurance policies. You’ll want to review NCUA’s regulatory alert on flood insurance alternatives pertaining to flood insurance policies that are not issued by the National Flood Insurance Program.
• Public unit and nonmember shares. NCUA’s rule was effective Jan. 29, 2020. Under 701.32, a credit union must develop and make available for examination a plan for the use of funds if its public unit and nonmember shares, combined with borrowing, exceed 70% of paid-in and unimpaired capital and surplus.
• Serving hemp businesses. Hemp is no longer a controlled substance at the federal level. Credit unions may provide business accounts and loans to lawfully operated hemp-related businesses within their fields of membership.
NCUA examiners will collect data through the examination process about the types of services credit unions may be providing to hemp-related businesses. Additional guidance for serving hemp businesses is forthcoming from NCUA.
• Supervisory committee audits. In September 2019, the NCUA Board approved a final rule amending part 715 to provide additional flexibility for financial statement audits. These amendments went into effect Jan. 6, 2020.
The agency issued a new guide to assist supervisory committees in conducting “other” supervisory committee audits. The new guide can be found here [PDF].
If the supervisory committee uses this option to complete its annual audit requirements under §715.7, it should consult Appendix A under Part 715 to meet the required minimum procedures.
The supervisory priority letter provides insight into the types of technology applications the agency is implementing in 2020 as part of its exam modernization efforts:
Questions? Don’t hesitate to contact us.
NANCY DeGRANDI is CUNA’s manager, federal compliance information and research.