The NCUA released Letter to Credit Unions 20-CU-01, which highlights their supervisory and examination focus for 2020. Included in the supervisory priorities are:
Bank Secrecy Act / Anti-Money Laundering (BSA/AML) This is not a new priority and is focused on every year. Emphasis for 2020 will be on customer due diligence and beneficial ownership requirements, proper filing of SARs and CTRs.
Consumer Financial Protection including:
- Electronic Fund Transfer Act (Regulation E) – disclosures and error resolution procedures
- Fair Credit Reporting Act (FCRA) – policies and procedures, accuracy of reporting particularly the date of first delinquency
- Gramm-Leach-Bliley Act (Privacy & Regulation P) – protection of non-public personal information
- Small dollar lending (Including PALs) – compliance with PAL requirements, and non-PALs compliance with regulatory requirements
- Truth in Lending (Regulation Z) – APRs, finance charges, and late charges, including how credit unions apply loan payments to principal, interest, fees and other charges
- Military Lending Act and Servicemembers Civil Relief Act (MLA & SCRA) – compliance with the requirements and protections
Credit Risk Examiners will place emphasis on the review of the credit union’s loan underwriting standards and procedures. In particular, examiners will verify if the credit union properly analyzed the ability of borrower(s) to repay without undue reliance on the value of any collateral.
Current Expected Credit Losses While the requirements have been postponed until 2023, examiners will still review credit unions’ plans on compliance.
Cybersecurity In addition to the Automated Cybersecurity Examination Tool (ACET), the NCUA will be piloting new procedures in 2020 to evaluate critical security controls, scaled to the size and risk profile of the credit union.
LIBOR Cessation Planning With the LIBOR not guaranteed after next year, examiners will assess credit unions’ exposure and planning related to the discontinuance of LIBOR, including identification of all LIBOR-related transactions, and planning, governance, senior executive engagement, budgeting, accounting, and other impacts related to the transition and discontinuance of LIBOR.
Liquidity Risk Examiners will assess liquidity management by evaluating the potential effects of changing interest rates, scenario analysis for liquidity risk modeling, and the appropriateness of contingency funding plans to address any potential liquidity shortfalls.
The Letter also includes snippets on NCUA modernization updates and statutory and regulatory updates. We recommend reviewing the letter to prepare for a visit from the examiners. If you have any questions, or concerns about your compliance with any of the above, contact us.
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