Samantha: Hello, this is Samantha Shares.
This episode covers N C U Aâs 2026 Supervisory Priorities,
Letter to Credit Unions.
The following is an audio version of that document.
This podcast is educational and is not legal advice.
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And now the document.
Date, January 2026.
Letter number 26 C U dash zero one.
N C U Aâs 2026 Supervisory Priorities.
N C U A Letter to Credit Unions.
National Credit Union Administration, seventeen seventy-five Duke
Street, Alexandria, Virginia, two two three one four.
To federally insured credit unions.
Subject, N C U Aâs 2026 Supervisory Priorities.
Dear boards of directors and chief executive officers.
This letter outlines N C U Aâs supervisory priorities and other
2026 examination program updates.
Our priorities focus on areas posing the highest risk to credit union members, the
credit union industry, and the National Credit Union Share Insurance Fund.
Consistent with the agencyâs no regulation by enforcement policy,
this letter is meant to assist credit unions as they plan for this year.
In 2025, the agency reexamined how we carry out our mission, laying the
foundation for improved efficiency by reducing burdensome work for both
credit unions and N C U A staff.
Moving forward, the agency will be focused on creating a more efficient and
tailored examination program, as well as continued implementation of presidential
executive orders and other laws, including the Guiding and Establishing National
Innovation for U S Stablecoins Act, Public Law one one nine dash two seven.
N C U A will continue conducting defined scope exams in most federal credit
unions with assets of fifty million dollars or less, and risk-focused exam
procedures for all other credit unions.
The priorities described below are meant to provide credit unions with insight into
the general focus of N C U A examinations.
N C U A examiners are expected to shift the areas of supervisory
focus based on a credit unionâs risk profile when appropriate.
The agency will continue to enforce all laws and regulations applicable
to credit unions, such as those related to consumer financial
protection and information security.
N C U A examiners will continue to focus on areas of risk where and when needed.
Supervisory priorities for 2026.
Balance sheet management.
Lending.
Loan growth has moderated in recent years, while loan performance has declined.
The overall delinquency rate and rolling twelve-month loss rate within federally
insured credit union loan portfolios is at its highest point in over a decade.
Asset quality deterioration and elevated loan losses remain material
contributors to balance sheet stress, especially where higher-cost funding
such as share certificates and borrowings limit margin recovery.
To assess lending practices and overall credit risk, N C U A examiners will
focus on credit union lending and related risk management practices.
Specific review areas will focus on institution-specific risks and may
include the sufficiency of credit administration, including loan
underwriting, loss mitigation programs, including loan modifications and workouts,
allowance for credit loss reserves and methodologies, and charge-off practices.
N C U A examiners will review portfolio monitoring, including the management of
any material credit risk concentrations.
When lending, servicing, or collection functions are outsourced, examiners
will also assess third-party risk management practices as appropriate.
For lending-related resources, refer to the Examinerâs Guide and the following.
Twenty-three C U dash zero five, Commercial Real Estate Loan
Accommodations and Workouts.
Twenty-three C U dash zero four, Update to Interagency Policy Statement
on Allowances for Credit Losses.
Fourteen C U dash zero eight, Home Equity Lines of Credit
Nearing Their End-of-Draw Period.
Zero seven C U dash one three, Evaluating Third Party Relationships.
Zero three C U dash zero one, Loan Charge-off Guidance.
Supervisory Letter ten dash zero three, Concentration Risk.
Sensitivity to market risk and liquidity.
Sensitivity to market risk, particularly interest rate risk, and liquidity risk
remain key supervisory priorities as credit unions continue to adjust to
a higher-rate environment following an extended period of balance
sheet expansion and repricing.
While recent declines in interest rates have lessened some pressures,
elevated funding costs, asset quality challenges, and structural liquidity
constraints continue to affect earnings and balance sheet resilience.
In this environment, replacing defaulted or lower-yielding assets has
become more challenging, increasing reliance on higher-yielding loans
and heightening sensitivity to both upward and downward rate movements.
While interest rates have begun to decline, many loans and funding costs
have not yet fully repriced, resulting in continued, albeit less, pressure on
consumers compared with peak rate levels.
Recent liquidity challenges have reinforced the importance of
diversified funding strategies and robust liquidity risk management.
Accordingly, credit unions should expect continued supervisory focus
on these areas to ensure institutions can withstand a range of interest
rate and funding stress conditions.
N C U A examiners will continue to review a credit unionâs ability
to identify, measure, monitor, and control interest rate and liquidity
risks through sound modeling practices, reasonable assumptions,
and appropriately tiered scenarios.
Reviews will focus on how credit unions incorporate these risks into governance
frameworks, contingency funding plans, and strategic decision-making, including
alignment between balance sheet structure, funding composition, and risk appetite.
For more sensitivity to market and liquidity risk information,
refer to the resource list below.
Examinerâs Guide, Liquidity and Sensitivity to Market Risk.
Twenty-two C U dash zero nine, Updates to Interest Rate Risk Supervisory Framework.
Supervisory Letter twenty-two dash zero one, Updates to Interest
Rate Risk Supervisory Framework.
Webpage, Liquidity Risk Resources.
Earnings and capital adequacy.
Earnings and capital adequacy remain central supervisory priorities as asset
quality pressures, elevated funding costs, and interest rate risk volatility continue
to affect balance sheet performance.
Asset quality deterioration and higher allowance expenses remain the primary
drivers of earnings pressure, while elevated funding costs constrain margin
recovery and capital accumulation.
Although regulatory capital levels, as measured by the net worth ratio,
have improved for many credit unions, earnings have shown less resilience.
Further, equity capital continues to reflect unrealized losses associated
with long-duration securities credit unions acquired during the recent
low-rate environment, which may limit balance sheet flexibility under stress.
When evaluating a credit unionâs earnings, N C U A examiners will assess whether
the current and prospective sources of earnings are sufficient to support capital
targets under a range of interest rate, credit, and liquidity stress scenarios.
N C U A examiner reviews may focus on policies, procedures, risk limits, and
capital planning practices, including how credit unions incorporate interest
rate risk, funding constraints, and concentration risks into their
capital adequacy assessments.
This supervisory approach will emphasize forward-looking analysis
aligned with a credit unionâs size, complexity, and risk profile.
For more earnings and capital-related information,
refer to the resource list below.
Examinerâs Guide, Earnings.
Supervisory Letters zero nine dash zero three, Reviewing Adequacy
of Earnings, and zero six dash zero one, Evaluating Earnings.
Webpage, Regulatory and Compliance Resources.
Operational risk management.
Payment systems.
The payments environment continues to evolve rapidly as consumer expectations
shift toward more efficient methods that provide for immediate access
to funds and funds transfers.
Payment systems rely on increasingly complex integrations of applications,
information systems, interfaces, security features, and internal controls.
This complexity introduces the potential for added operational
and security risk exposures.
The risks of fraudulently induced payments, illicit use of consumer data,
and cybersecurity breaches targeting payment systems continue to grow.
N C U A examiners will continue to assess whether credit unions have effective
governance, risk assessments, vendor management, and security frameworks
in place to support payment system operations, protect member data, and
ensure resilience against fraud and cyber threats inherent in payment ecosystems.
For more payment systems information, refer to the retail payment systems
and the wholesale payment systems topics in the Federal Financial
Institutions Examination Councilâs I T Examination Handbook Infobase.
Fraud prevention and detection.
Fraud remains a pervasive and elevated risk in the U S financial system.
N C U A examiners will continue to review credit union efforts to deter
and detect fraud, including the adequacy of internal controls and separation of
duties to guard against insider abuse.
In 2026, the agency will review its examination procedures to ensure internal
control and other review areas align with the ever-changing fraud landscape.
N C U A will continue to work with key stakeholders in the credit union,
regulatory, and law enforcement communities to enhance fraud
prevention and detection awareness and capabilities where possible.
Visit N C U Aâs Fraud Prevention Resources page for fraud prevention information.
Compliance risk management.
Bank Secrecy Act compliance and anti-money laundering and countering
the financing of terrorism programs.
The B S A landscape will continue to evolve throughout 2026.
The Financial Crimes Enforcement Network and the federal financial
institution regulators, including N C U A, continue to implement provisions of
the Anti-Money Laundering Act of 2020 designed to modernize and strengthen
the U S A M L and C F T regime.
Concurrently, F I N C E N and the regulators will continue to evaluate
ways to reduce B S A compliance burdens while helping financial
institutions maintain effective, risk-based A M L and C F T programs.
Significant developments and changes in the regulatory
system are expected in 2026.
N C U A will notify credit unions of regulatory changes, and credit
union personnel may also sign up to receive F I N C E N updates.
Regardless of the notification method, credit unions should stay informed
to ensure their B S A policies, procedures, internal controls, and
overall A M L and C F T programs remain in compliance with changes.
The emphasis in 2026 will be on evaluating your credit unionâs risk-based approach
to B S A compliance and how well the A M L and C F T program is tailored to the
credit unionâs specific risk profile.
N C U A examiners will consider whether credit unions focus their resources on
the areas of greatest money laundering and terrorist financing risk and
whether policies, procedures, and controls are effective at mitigating
illicit financial activity risks.
For more information and resources, visit the agencyâs B
S A and A M L resources webpage.
Conclusion.
N C U A is dedicated to supporting credit unions, developing right-sized regulations
and policies that safely advance innovation within the credit union system,
and protecting member deposits and the Share Insurance Fund through productive,
streamlined credit union supervision.
Focusing on these priorities, along with reviewing areas of risk
specific to each credit union, N C U Aâs examination and supervision
program will continue to facilitate a safe and sound credit union system.
We welcome your feedback as we navigate the ever-changing economic
and technological ecosystems together.
As a reminder, credit unions may find it useful to record their N C U A final
exit meeting or joint conference for documentation and training purposes.
We ask that this recording be shared with N C U A.
We encourage state-chartered credit unions to consult their regulators
prior to recording meetings.
Please direct any feedback or questions concerning the 2026 supervisory
priorities to your N C U A examiner, regional office, or Ask N C U A.
Sincerely, Kyle S.
Hauptman, Chairman.
This concludes the document.
If your credit union could use assistance with your exam, reach out to Mark Treichel
on LinkedIn or at Mark Treichel dot com.
This is Samantha Shares, and we thank you for listening.