On January 7, the National Credit Union Administration (NCUA) released its supervisory priorities for 2025, outlining the key areas of focus for federally insured credit unions. This guidance is crucial for credit unions as it highlights the areas posing the highest risk to members, the industry, and the National Credit Union Share Insurance Fund (Share Insurance Fund).
The NCUA has observed continued financial stress on credit union balance sheets throughout 2024. Loan performance has deteriorated since 2022, with delinquency and charge-off rates reaching their highest levels in over a decade. Despite these challenges, the credit union system remains stable and resilient against economic disruptions.
Supervisory Priorities for 2025:
- Credit Risk. Credit risk remains a top priority. The NCUA has noted increased delinquencies and charge-offs, particularly in credit card and used vehicle loan portfolios. Examiners will review lending and risk-management practices, including loan underwriting standards, collection programs, and Allowance for Credit Losses reserves. Credit unions are encouraged to work with borrowers facing financial difficulties, aligning with the statutory mission of meeting members’ credit and savings needs.
- Balance Sheet Management and Risk to Earnings and Net Worth. Credit unions face risks affecting their earnings and net worth, including credit, liquidity, and market risk. Interest rate risk is particularly significant, impacting income from lending and funding activities. Examiners will evaluate earnings and net worth risk-management frameworks, focusing on trends and concentration risks. They will also assess liquidity risk-management frameworks to ensure adequacy relative to funding needs.
- Cybersecurity remains a critical focus due to the increasing frequency and sophistication of cyberattacks. Examiners will assess information security programs and continuity of operations plans. Credit unions are encouraged to use the Automated Cybersecurity Evaluation Toolbox and report cyber incidents to the NCUA within 72 hours. This includes notifying the NCUA if a third-party provider experiences a cyber incident affecting the credit union. Boards of directors are urged to prioritize cybersecurity oversight.
- Consumer Financial Protection. The NCUA will continue to review compliance with consumer financial protection laws and regulations during every federal credit union examination. In addition to reviewing areas specific to each credit union identified during the risk-focused examination scoping process, examiners will focus on the following areas:
- Overdraft programs. Examiners will continue to review policies, procedures, disclosures, fees, account statements, member complaints, internal reviews, and websites related to credit unions’ overdraft programs.
- Fair lending practices. Examiners will review policies and procedures for identifying and mitigating potential discrimination in residential real estate valuation practices.
- Home Mortgage Disclosure Act (HMDA) compliance. Examiners will assess compliance with HMDA data collection and reporting policies and procedures, including transaction testing, for credit unions above the reporting threshold.
- Military Lending Act (MLA) requirements. Examiners will assess compliance with the MLA requirements, including policies and procedures, compliance management systems, and monitoring for military status.
- Electronic Fund Transfer Act policies. Examiners will review policies and procedures, including for payments and error resolution.
Other Updates:
- Exam Flexibility Initiative. The NCUA will extend the exam cycle for credit unions with over $1 billion in assets rated CAMELS composite 1 or 2, with no CEO change since the last examination, to 12-16 months. The extended exam cycle for eligible federal credit unions will be shortened from 14-20 months to 14-18 months. The Small Credit Union Exam Program will continue for credit unions with assets of $50 million or less.
- Minority Depository Institution (MDI) Preservation Program. The NCUA recognizes the importance of MDIs and will offer customized support to MDIs and credit unions with less than $100 million in assets. This support aims to help these institutions serve underserved communities effectively.
The NCUA concluded by emphasizing its commitment to evolving its supervisory methods to support credit unions in an ever-changing economic and technological landscape.
