On January 23, the Chairman of the National Credit Union Administration (NCUA) released a letter outlining its supervisory priorities for the new year. While the organization acknowledged that the credit union system had remained largely stable during 2023, it observed growing signs of financial strain on balance sheets. Specifically, the “rise in interest rate and liquidity risks resulted in an increase in the number of composite CAMELS code 3, 4, and 5 credit unions. Inflation and interest rates are affecting household budgets, which could lead to an increase in credit risk in future quarters.”

As in 2023, the NCUA will continue to prioritize sound risk management practices, liquidity risk and contingency funding planning, compliance with consumer financial protection laws, cybersecurity practices and procedures, and interest rate risk management. New for 2024 is a prioritization of Bank Secrecy Act (BSA) compliance. “A credit union’s deficiency in or failure to comply with the BSA’s programmatic, recordkeeping, and reporting requirements can pose a significant risk to the institution, its members, and the Share Insurance Fund.” The NCUA stressed that credit unions must remain vigilant in maintaining and updating their BSA policies, procedures, programs, and controls.

The NCUA will continue conducting supervisory activities both onsite and offsite, as appropriate, as well as providing an extended exam cycle for certain credit unions. The NCUA will continue its small credit union exam program in many federal credit unions with assets under $50 million. For all other credit unions, NCUA examiners will use the risk-focused examination procedures.

The Chairman concluded his letter by emphasizing that “[w]e are committed to adopting innovations and implementing efficient practices in our exam program. Our top objective of ensuring a safe and sound credit union system that protects credit union members can only be fulfilled when we adapt to the ever-changing economic and technological landscape.”