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NCUA Examination Focus

Tim Segerson, Deputy Director-Office of Examination and Insurance of the NCUA, spoke at the 2013 AICPA National Conference on Credit Unions.  During the course of his presentation, he provided a list of key areas of examination that he expected the NCUA will focus on for the upcoming year.

The areas of examination include:

1.  Interest Rate Risk

  • Balance sheet evolution – Significant growth in mortgage and L/T investments/Reaching for yield
  • Liquidity risk
  • Earnings pressure when interest rates rise
  • Comprehensive risk management, precise ALM modeling and thorough testing expected where higher risk noted

2.  Operational Risk/Off Balance Sheet

  • AML/BSA – Heightened awareness/monitoring of high risk accounts
  • Cyber security – Growing range of service offerings by credit unions present more areas of vulnerability
  • Fraud indicators – Independence and effectiveness of internal audit and internal controls to be tested
  • Benefit plans – BOLI/Underfunded pension liabilities/Significant investment in non-conforming securities related to pension assets

3.  Concentrations of Risk

  • Credit – Risk management over both significant individual and asset class concentrations expected
  • Interdependence – Domino effect among vendors if key relation fails. Increased due diligence by credit unions expected

4.  CUSA/Third Party Exposures

  • Due diligence
  • Risk assessments

5.  New and Fast Growing Programs

  • Related policy, procedure, control program management
  • Business models and plans
  • Exit strategies/risk mitigation

6. Compliance

  • Mortgage compliance
  • Upcoming other compliance rules

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  • Gary Condit
  • Director, Assurance & Business Advisory Services
  • (614) 947-5272