NASHVILLE, Tenn.–NCUA Chairman Todd Harper told state credit union regulators and state-chartered CUs gathered here the federal/state partnership has been “mutually beneficial” and led to “innovative and effective tools” he expects to continue.
Speaking to the NASCUS State System Summit, Harper noted for example that the agency’s regional offices and Office of National Examinations and Supervision (ONES) can now use the recently modified operating agreement template to enter into new operating agreements with state regulators.
Moreover, he said the NCUA-SSA Working Group
“worked closely” with NASCUS and state agencies to develop a list of lessons learned from the Alternating Exam Pilot Program.
“Based on these insights, the NCUA will soon consider whether to formally implement an alternating examination program,” Harper said.
He told the meeting collaboration between federal and state regulators is going to be needed as the U.S. financial sector faces growing threats due to poor risk management at some financial institutions and rising economic concerns for the balance sheets of all credit unions.
Concern Over CRE
As he has in remarks to other groups recently, Harper said he is cautiously optimistic about the economy, although the agency does see heightened credit risk as a threat, especially in commercial real estate. For that reason he said NCUA has expanded its commercial real estate monitoring efforts to include closely scrutinizing loan performance, conducting risk assessments and scenario analysis based on loan exposures, developing enhanced review procedures for credit unions with elevated risk profiles, and undertaking targeted reviews at higher risk credit unions.
In addition, he noted NCUA worked with other federal banking agencies — and in consultation with state bank and credit union regulators — to issue the interagency Policy Statement on Prudent Commercial Real Estate Loan Accommodations and Workouts in June.
He also reminded credit unions the agency has added a requirement this year for examiners to review the liquidity policy and a list of contingent liquidity sources on defined-scope exams for small credit unions.
Additional Issues
Other issues touched on by Harper during his remarks:
- Cybersecurity Risk. Harper called on regulators and CUs to prioritize cybersecurity practices and pointed to the agency’s new Information Security Examination procedures.
- Vendor Authority. Harper reiterated his call for NCUA to have oversight over service providers, including CUSOs, which he said are now a “regulatory blind spot.”
- Artificial Intelligence. “…Artificial intelligence, like every new technology, offers both promise and peril. Our role as regulators and supervisors is to maximize and deliver on the former while identifying and mitigating the risks of the latter,” Harper said, adding the agency recently reminded CUs of their obligation to comply with Equal Credit Opportunity Act nondiscrimination requirements in their use of automated underwriting systems.
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