NCUA Exam Focus in 2017 Posted by Association of Vermont Credit Unions on 1:42 PM

The National Credit Union Administration (NCUA) recently issued Letter to Credit Unions 17-CU-01 which covers the Administrations supervisory focus for 2017.  The letter assists credit unions in preparing for their upcoming examinations. In general, the examinations in 2017 will focus on the following:

• Cybersecurity - For the third year in a row, cybersecurity is the top supervisory focus.  The NCUA will continue to evaluate each credit union’s cybersecurity risk management policies.  The NCUA encourages credit unions to use the FFIEC Cybersecurity Assessment Tool as a way to and bolster the credit union’s security and risk management processes.
• BSA Compliance - The NCUA will review credit unions for compliance with the Bank Secrecy Act and the related examination questionnaire.  In addition, the NCUA will focus on credit unions with relationships to money service businesses (MSBs) and other accounts that may pose a higher risk for money laundering.  Credit unions that provide services for MSBs, MRBs, or other types of high-risk businesses need specialized procedures in place to appropriately classify risk and determine the depth and intensity of monitoring that is necessary.
• Internal Controls/Fraud Prevention - The NCUA will evaluate the adequacy of a credit union’s internal controls, as well as overall efforts to prevent and control fraud.  The letter highlights that credit unions with limited staff may have inherent challenges in maintaining adequate separation of duties.
  
  
• Interest Rate and Liquidity Risk - Additional items that have been of NCUA supervisory focus for the last several years.  NCUA field staff will begin using the revised IRR supervisory tool and new examination procedures to assess interest rate risk management practices in credit unions.  The NCUA will also focus on the relationship between IRR and liquidity risk.
• Commercial Lending - NCUA field staff will evaluate a credit union’s commercial loan policies and procedures and assess the risk management processes associated with managing a commercial loan portfolio. Credit union officials should be prepared to provide documentation to support management’s ability to effectively monitor and manage its commercial loan portfolio.
• Consumer Compliance - The letter to credit unions highlights that examiners will begin evaluating credit unions compliance with the Military Lending Act requirements that had the mandatory compliance date of October 3, 2016.  Per Letter to Credit Unions 16-CU-07 these first examinations will focus on:
• Ensuring that a credit union is aware of amendments to the rule and determining the applicability of the amendments;
• Ensuring that a credit union is making progress in complying with the rule, if applicable; and
• Assessing the quality of a credit union’s compliance risk management systems and its policies and procedures for implementing the program.