LAS VEGAS–To an audience largely made up of credit union board members, NCUA Chairman Todd Harper offered an overview of agency activities and issues boards need to be on top of.
Touching on points he has made previously, Harper told the Credit Union Leadership Convention the “turmoil within the banking system” is a reminder of the need to carefully manage capital, interest rate, liquidity, and credit risks, and he further noted for the audience that the agency has updated its guidance on how examiners work with credit unions exposed to the market risk of rising interest rates.
‘Remain Diligent’
Harper called on credit unions and boards of directors to “remain diligent” in managing the potential risks on their balance sheets and continue to monitor economic conditions and the interest rate environment.
The chairman said the “good news” is that the credit union system overall remains well positioned, as is NCUA’s supervisory process to address issues that may arise from broader market concerns.
Issues Raised
Among the points touched upon by Harper during his remarks:
- Interest Rate Risk, Liquidity Risk, and the Central Liquidity Facility. Harper said changes in inflation, the interest rate environment, and broader economic conditions over the last year call for extra vigilance. “A credit union’s ability to manage interest rate risk will remain a crucial factor in its performance going forward.”
- The Central Liquidity Facility. Harper again called on Congress to restore CLF funding and powers that were granted during the pandemic but which have since expired. He also reminded that “well-run and well-capitalized credit unions” also have access to the Federal Reserve’s Discount Window and the newly created Bank Term Funding Program to manage their liquidity.
- Succession Planning. Harper told the board members in attendance NCUA has passed a rule requiring boards at federal credit unions to establish and adhere to processes for succession planning.
- Cybersecurity Risk. “Ransomware, social engineering, and phishing are but a few of the known examples of the cyber threats we all face. But what is more worrisome are the countless threats we do not know about,” Harper said. “And these risks are likely to continue and accelerate in the foreseeable future. Therefore, all of us must improve our cybersecurity practices. The NCUA earlier this year began implementing its new Information Security Examination procedures for credit unions to prepare for, withstand, and recover from cybersecurity attacks.” Harper used his remarks to repeat his call for NCUA to have third-party oversight authority.
- Consumer Financial Protection. “It’s also critical to uphold the statutory mission of the credit union system to meet the financial needs of members, especially those of modest means,” the chairman said. “And, while that may mean swimming against the current at times, the long-term benefits are obvious.”