Report lists key areas affecting NCUA resource needs

(March 19, 2021) Nine areas that will affect the resource needs of NCUA– including monitoring the equity ratio of the savings insurance fund, enhancing the examination program and building the supervision workforce — in the coming year and likely beyond, are listed in the agency’s 2020 annual report released this week.

The nine areas, the agency said, “will continue to shape the environment facing credit unions and will determine the resource needs of the NCUA.” Those areas are:

  • Monitoring the National Credit Union Share Insurance Fund’s (NCUSIF’s) equity ratio
  • Enhancing the agency’s examination program
  • Building the NCUA workforce to supervise an evolving credit union environment
  • Declining membership in small credit unions
  • Growing threats to cybersecurity
  • Adapting to technology-driven changes to the financial landscape
  • Factoring the near-term economic outlook
  • Managing interest rate risk and liquidity risk
  • Continuing consolidation

Regarding the insurance fund, the agency said that an incident such as a significant credit union failure that drops the equity ratio below 1.0% “would result in a direct expense to credit unions through the impairment of the 1.0% capital deposit they contribute to the fund, which credit unions have recorded as an asset on their balance sheets.”

Additionally, if the equity ratio falls below 1.20%, or is expected to within six months, the Federal Credit Union Act requires the NCUA Board to assess a premium on federally insured credit unions to restore the fund to at least 1.20% or adopt a fund restoration plan,” the report reminds. It notes that the fund, as of Dec. 31, 2020, was at 1.26% of equity to shares insured — 12 points below the “normal operating level” of the fund of 1.38%.

As for enhancing the exam program, the report states that in 2021 the agency will finalize deployment of the new MERIT system and transition new exams from AIRES to the new method. “This transition includes the agency’s primary examination platform as well as many business processes targeted to take advantage of MERIT’s configurable platform,” the report states. It also indicates that the agency will continue to develop its Enterprise Data Program, intended to “enhance how agency governs and reports its data.”

On building its workforce, the agency said it increasingly needs cybersecurity specialists and experts in areas including capital markets, commercial lending, consumer financial protection and payments systems. “The agency also has a large percentage of employees who have reached, or will soon reach, retirement age, including many in senior levels of management,” the report states. “Finding appropriate successors who can lead the agency and employees who have the requisite skills and expertise is essential to ensuring that the NCUA can continue to achieve its mission effectively.”

The report notes that, this year, it will use a new learning management system to “better enable access to on-demand training for all employees,” and will develop and execute training to support implementation of the new MERIT exam system and its multi-year leadership development strategy.

Also in the report, the agency states:

  • Among its supervisory priorities in the wake the coronavirus crisis, it will work with state regulators and credit unions to identify operational challenges emerging from the impact of the pandemic;
  • It will continue in 2021 working with six state regulators in piloting an alternating-year examination program for federally insured, state-chartered credit unions (FISCUs). After the pilot ends, the agency said, it and the states will assess how – and whether – the results can improve the exam program, particularly by improving coordination.

NCUA Releases 2020 Annual Report