The COVID-19 pandemic has brought about a lot of changes for credit unions. New compliance measures. New forbearance guidance. Operational priorities.

Various regulatory bodies Thankfully, on July 15 the NCUA released an update to the 2020 supervisory priorities.

Here is an update on the new guidance.

1. The Bank Secrecy Act/ Anti-Money Laundering (BSA/AML)

The BSA and AML will remain priorities through the rest of the year. The NCUA is continuing to work on additional updates to the FFIEC BSA/AML Examination Manual.  

2. CARES Act

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was passed on March 25^th. Adherence is now considered a supervisory priority.

The CARES Act requires credit unions to do a few things regarding mortgage loans:

1. They must offer forbearance for up to 180 days for federally backed mortgages. Upon request, that forbearance period must be extended an additional 180 days.
2. No additional fees or interest is to be charged if financial hardship is cited during the covered forbearance period.
3. Foreclosure cannot be initiated during the covered period.

3. Consumer Financial Protection

For the most part, supervisory priorities pertaining to consumer financial protection are the same. There are two priority updates:

1. Compliance with recent changes to Regulation E’s remittance transfer rule
2. A review of any waivers of the waiting periods in the TILA/RESPA Integrated Disclosures (TRID) rule and waivers of the rescission time periods in Regulation Z.

4. Credit Risk Management and Allowances for Loan and Lease Losses (ALLL)

The NCUA has announced that their priority here will not be credit risk. Instead they will be reviewing the actions credit unions took to aid those affected by COVID-19.

They’ll be checking in to make sure ALLL reflect the state of the troubled economy.

The NAFCU blog features a full list of relevant resources regarding ALLL requirements.

5. Cybersecurity

Originally, the Automated Cybersecurity Examination Tool (ACT) was going to focus on assessing cybersecurity maturity. Now they will be focusing on critical security controls. 

They are to begin piloting the Information Technology Risk Examination (InTREx) Program. The FDIC, FRS and state authorities will be employing the InTREx. They’ll be checking for fair and consistent approaches to security.

6. LIBOR Transition Planning

While LIBOR transition planning will continue to be a priority. The CFPB has offered materials about consumer lending, but some accounts may be affected (like investments).

LIBOR is set to be phased out by the end of 2021.

7. Liquidity Risk

Liquidity risk examination will continue to be a supervisory priority in 2021. In consideration of the effects of the pandemic, the focus will shift. Instead of balance sheets, examiners will look at risk management and planning.

They will assess:

• The effects of loan payment forbearance
• Delinquencies
• Projected credit losses
• Loan modifications
• Scenario analysis for changes in cash flow projections based on:
  • Changing prepayment speeds
  • Changes in share composition and volumes
  • Potential effects of low interest rates and credit deterioration on the market value of assets, funding costs, and borrowing capacity
  • The adequacy of any contingency funding plans.

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Additional Resources

The Coronavirus pandemic has changed everyone's lives. Credit Unions are helping members through new financial journeys. And they’re focusing in on changes in compliance and best practice.

The NCUA is adapting along-side them. These updates to their 2020 Supervisory Priorities are sure to be followed up with more changes to benefit credit unions and their members.

Read the full list of the NCUA’s supervisory priority updates here.