NCUA adds 3 top management, performance challenges faced in 2022; highlights pandemic, diversity (MDIs), staffing

Of seven top management and performance challenges faced by the agency in 2022, a report just released by the federal credit union regulator’s inspector general office states, three of the challenges are newly identified: ensuring readiness in a pandemic environment (economic), supporting diversity in the credit union industry, and managing human resources.

The top challenges are described in a March 4 report of the National Credit Union Administration (NCUA) Office of Inspector General (OIG) that was just recently posted to the agency’s website. The IG office, in its report, said it holds the information to be helpful to policy makers, including the NCUA and congressional oversight bodies.  “We further hope that it is informative for the credit union industry regarding the programs and operations at the NCUA and the challenges it faces,” it said.

The seven top challenges identified for the coming year include:

  • Economic Outlook in a Pandemic Environment (new)
  • 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 (new)
  • Human Capital and Planning for the Future Workforce (new)

Four of the challenges were also reported last year. Some of the detail regarding the three new ones is provided below:

Economic Outlook in a Pandemic Environment

Inflation, rising interest rates, declining confidence in economic policies, worsening views of long-term economic prospects, continues to weigh on confidence, the report states. Noting that individuals and businesses may not be able to meet their debt obligations to financial institutions, it states 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,” it states “The NCUA should also prepare for credit union failures in the event that losses overwhelm credit unions. 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 in the Credit Union Industry

The report notes that minority communities and businesses have suffered significantly during the pandemic. It said the agency’s continued commitment to commitment to diversity and inclusion in the federal regulatory process is is critical for the NCUA to foster greater financial inclusion for all Americans.

The report points to the agency’s 2015 final interpretive ruling to establish a Minority Depository Institution (MDI) Preservation Program, established to achieve the goals of preserving and encouraging MDIs as directed under section 308 of the 1989 Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). These goals, it states, are to preserve the present number of MDIs; preserve the minority character of MDIs that are involuntarily merged, or are acquired, by following the prescribed “general preference guidelines” to identify a merger or acquisition partner; to provide technical assistance to prevent insolvency of MDIs that are no longer insolvent; to promote and encourage the creation of new MDIs; and to provide for training, technical assistance, and educational programs.

“The NCUA plays an important role in preserving and promoting MDIs. From the OIG’s 2022 Work Plan, we recently began an audit of the NCUA’s Minority Depository Institution Program,” the report notes. “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 and Planning for the Future Workforce

The report points to the “significant” management challenge for the NCUA of maintaining a well-trained, sustainable workforce while facing challenges in retirement eligibilities, succession planning, and training. The agency has 1,150 employees in its central office and three regional offices, with 35% (407) of them eligible to retire in five years; that includes retirement rates of 61% for executives and 55% for supervisors over the same period.

A key challenge here, it notes, is finding “appropriate” successors who can lead nad 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.

NCUA OIG report: Top Management and Performance Challenges Facing the National Credit Union Administration for 2022