NCUA Outlines Supervisory Priorities for 2023 Exams

The National Credit Union Administration (the "NCUA") outlined supervisory priorities for its 2023 examination program, focusing on areas that pose the greatest risk to its credit union members.

In a letter to federally insured credit unions, the NCUA stated that credit union examinations will be conducted both onsite and offsite. The NCUA said that it will also continue its Small Credit Union Exam Program in most federal credit unions with total assets under $50 million and will use its risk-focused examination procedures for all others.

The NCUA's 2023 supervisory priorities include:

Financial-related:

• interest rate risk ("IRR") - ensuring that IRR programs effectively manage (i) documentation of key assumptions and related data, (ii) measurement and control of exposure to IRR, (iii) communication of program results to decision-makers and the board of directors and (iv) proactively remaining within safe and sound policy limits;

• liquidity risk - evaluating current and prospective sources of liquidity with respect to funding needs and adequacy of the risk management framework given the examinee's size, complexity and risk profile;

• credit risk - evaluating soundness of existing lending programs, including any adjustments made to loan underwriting standards, portfolio monitoring practices and loan workout strategies for borrowers;

• current expected credit loss implementation - ensuring compliance with Allowance for Credit Losses ("ACL") policies and procedures related to loans and leases, documentation of an ACL reserving methodology, whether the examinee's ACL program is subject to independent review and compliance with GAAP (as applicable);

Crime-related:

• fraud prevention and detection - implementing a management questionnaire as part of its examinations, which is designed to enhance the identification of fraud red flags, material supervisory concerns or other potential new risks;

• cybersecurity - evaluating the examinee's cybersecurity programs using its new Information Security Examination procedures for 2023;

Other:

• consumer financial protection - ensuring compliance related to overdraft programs, fair lending, the Truth in Lending Act and the Fair Credit Reporting Act;

• support for small credit unions and minority depository institutions ("MDIs") - providing training, guidance and support to credit union management regarding operational issues as well as identifying resources available to small credit unions and MDIs; and

• succession planning - ensuring compliance with internal policies related to succession planning.

In response to the success of its September 2021 post-examination survey pilot, the NCUA said it will implement a revised post-examination survey in 2023 in order to continue obtaining feedback from its members.