The credit union system remains on solid footing, NCUA Chairman Todd Harper told the CUNA Governmental Affairs Conference Monday afternoon. Total loans, assets, and insured shares all increased in 2022, while capital levels remained strong. 

“Economic activity, however, has begun to cool. Insured share growth has slowed, as some consumers have drawn down their built-up savings,” Harper said. “Households are also taking on more debt. And, in the event of an economic slowdown, these factors could hinder borrowers’ ability to repay outstanding debt, exposing your credit union to greater levels of credit risk. That’s why we must all take actions to prepare for a downturn.” 

He outlined several areas NCUA would be focusing on during credit union examinations in 2023, including the ability to manage interest rate risk, which he said will be a “crucial factor” in 2023 performance.  

“As rates increase in the current economic environment, so does the associated risk that makes short-term liquidity events possible,” he said. “The potential for sudden changes in either inflation, the rate environment, or the economy means that you all must remain nimble.” 

NCUA will start using its new Information Security Examination procedures this year, Harper said, noting that agency examiners will review, “website advertising related to overdraft programs, balance calculation methods, and settlement processes.  

“Examiners at federal credit unions with more than $500 million in assets will dig into authorize positive, settle negative transactions, as well as some other problematic fees,” he added.  

Harper also reiterated NCUA’s support for legislation to restore the Central Liquidity Facility’s (CLF) flexibility. The provisions were part of the CARES Act in 2020 and expired at the end of 2022. CUNA supported legislation to extend this flexibility for several years.  

“Now is not the time to cut a liquidity lifeline,” he said. “That’s why the NCUA Board is united in its legislative request to restore the CLF’s agent-member flexibility, and the agency will continue to engage with Congress on this legislative priority." 

Harper also noted his support for granting NCUA third-party vendor authority, which CUNA opposes.