ALEXANDRIA, Va.–A new report from NCUA’s Office of Inspector General has identified three new challenges for the agency as part of the seven top management and performance challenges it faces.
The three newly identified challenges are ensuring readiness in a pandemic environment (economic), supporting diversity in the credit union industry, and managing human resources.
The results were released as part of a March 4 report by the OIG that is designed to be “helpful” to the regulator and larger credit union community.
According to the agency, the seven top challenges identified for the coming year include:
- Economic Outlook in a Pandemic Environment
- Cybersecurity and IT Governance – Protecting Systems and Data
- Risks Posed by Third-Party Service Providers
- Managing Interest Rate Risk and Liquidity Risk
- Industry Consolidation and Challenges Facing Small Credit Unions
- Supporting Diversity in the Credit Union Industry
- Human Capital and Planning for the Future Workforce (new)
The Economic Outlook
The OIG said inflation, rising interest rates, declining confidence in economic policies, and worsening views of long-term economic prospects all continue to affect the confidence of members and credit union leaders alike, and that loan defaults may increase as pandemic-related economic pressures continue.
“The NCUA should continue to stand ready to fulfill its mission to maintain financial stability in the credit union industry, and to identify and mitigate risks through examinations,” the OIG stated in the report. “The NCUA should also prepare for credit union failures in the event that losses overwhelm credit unions,” the OIG report states. “Further, through its supervisory processes, the NCUA should review credit unions’ adherence to government Guaranteed Loan Program requirements and identify fraud, operational, legal, and reputational risks that may affect the safety and soundness of the credit union industry.”
Supporting Diversity
According to the OIG analysis, minoritycommunities and businesses have suffered significantly during the pandemic, and NCUA’s commitment to diversity and inclusion in the regulatory process “is critical for the NCUA to foster greater financial inclusion for all Americans.”
The report cited NCUA’s 2015 final interpretive ruling to establish a Minority Depository Institution (MDI) Preservation Program, created to establish and preserve MDIs as directed under section 308 of the 1989 Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).
“The NCUA plays an important role in preserving and promoting MDIs,” according to the OIG report. “From the OIG’s 2022 Work Plan, we recently began an audit of the NCUA’s Minority Depository Institution Program. We plan to review the NCUA’s actions to preserve and promote MDIs and assess the agency’s achievement of the MDI Program’s goals.”
Human Capital
Finally, the report said it identified “significant” management challenges for NCUA in maintaining a “well-trained, sustainable workforce while facing challenges in retirement eligibilities, succession planning, and training.”
The OIG said NCUA has 1,150 employees in its central office and three regional offices, with 35% (407) eligible to retire in five years. That includes retirement rates of 61% for executives and 55% for supervisors over the same period.
What will be key, according to the report, will be identifying “appropriate” successors who can lead and who have the requisite skills and expertise needed to ensure the agency’s ability to achieve its mission effectively, “especially given the significant investments in, and time required for, credit union examiner certification,” the report states.
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