LTCU No. 17-CU-09 Supervisory priorities for 2018

Letters to Credit Unions No.: 17-CU-09 Supervisory Priorities for 2018
December 2017

NCUA has issued its annual Letter to Credit Unions (LTCU) identifying the examination priorities given to NCUA examiners for the coming year. In 2018, NCUA examiners will focus on the following issues:

  • Cybersecurity Assessment

NCUA has been developing an examination tool to standardize evaluation of credit union cybersecurity preparedness. The tool, the Automated Cybersecurity Examination Tool (ACET) incorporates standards and practices established for financial institutions and aligns with the Cybersecurity Assessment Tool developed by the FFIEC.

The NCUA will begin using the ACET in examinations of credit unions with over $1 billion in assets. Moving forward, NCUA will be refining the ACET for scaling to use on more modest sized credit unions in the future.


For the fifth consecutive year, NCUA will continue its focus on BSA/AML compliance. In particular, NCUA will be assessing compliance with the new Customer Due Diligence regulations (effective May 11, 2018) in the second half of 2018.

  • Internal Controls and Fraud Prevention

NCUA will be evaluating the adequacy of credit union internal controls, as well as overall efforts to prevent and detect fraud.

  • Interest Rate and Liquidity Risk

NCUA will continue using its interest rate risk supervisory tool and examination procedures to assess credit union interest rate risk management practices. NCUA discussed these procedures in 2016 in LTCU 16-CU-08 Revised Interest Rate Risk Supervision.

  • Automobile Lending

NCUA will be scrutinizing credit unions with material exposure to higher risk auto lending portfolios with the following concentrations:

  • Extended loan maturities of over 7 years.
  • High loan-to-value.
  • Near-prime or subprime.
  • Indirect lending programs.

See LTCU 10-CU-03 Concentration Risk for more information.

  • Commercial Lending

NCUA will continue to focus on the credit union commercial loan policies and procedures in light of the revised principle based NCUA Part 723 Commercial Lending rule. The NCUA’s online Examiner’s Guide provides guidance on NCUA’s expectations for commercial lending risk management. See LTCU 16-CU-11 Member Business Loans Guidance Added to Examiner’s Guide.

  • Consumer Compliance

NCUA will be focusing on FCU efforts to comply with CFPB changes to Regulation C (HMDA). Most of the new HMDA requirements take effect on January 1, 2018. Noting “significant systems and operational challenges needed to adjust to the revised regulation” credit unions need for the HMDA data collection, NCUA will not cite violations for data errors found in the FCU’s quarterly LARs (loan application records), nor require data resubmission unless data errors are material.

NCUA examiners will also be focusing on state and federal credit union efforts to comply with the Military Lending Act’s restrictions against the use of certain contract terms and credit card provisions. For more information on the Military Lending Act, see the NCUA Regulatory Alert 16-RA-04, Guidance on Regulatory Changes Affecting Military Lenders and Regulatory Alert 16-RA-06, Department of Defense’s Interpretive Guidance on Military Lending Act Limitations on Terms of Consumer Credit Extended to Service Members and Dependents.

NCUA Examiners will also review credit union’s overdraft policies and procedures for compliance with Regulation E.

NCUA Examination Program
In 2018 NCUA expects to complete full implementation of its extended exam cycle (discussed more fully LTCU 16-CU-12 Risk Based Examination Policy). For credit unions with less than $50 million in assets, NCUA will continue to use the streamlined small credit union exam program (for CAMEL ratings of 1, 2, and 3).

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