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This podcast provides you the ability to listen to new regulatory guidance issued by the National Credit Union Administration, and occasionally the F D I C, the O C C, the F F I E C, or the C F P B. We will focus on new and material agency guidance, and historically important and still active guidance from past years that NCUA cites in examinations or conversations. This podcast is educational only and is not legal advice. We are sponsored by Credit Union Exam Solutions Incorporated. We also have another podcast called With Flying Colors where we provide tips for achieving success with the N C U A examination process and discuss hot topics that impact your credit union.
Samantha: Hello, this is Samantha Shares.
This episode covers N C U A's
2026 Supervisory Priorities.
The following is an audio
version of that document.
This podcast is educational
and is not legal advice.
We are sponsored by Credit Union
Exam Solutions Incorporated, whose
team has over two hundred and
forty years of National Credit
Union Administration experience.
We assist our clients with N C
U A so they save time and money.
If you are worried about a recent,
upcoming, or in process N C U A
examination, reach out to learn how they
can assist at Mark Treichel dot com.
Also check out our other podcast called
With Flying Colors where we provide tips
on how to achieve success with N C U A.
And now the document.
N C U A Letter to Credit Unions.
Date, January 2026.
Letter Number 26-CU-01.
Subject, N C U A's 2026
Supervisory Priorities.
Dear Boards of Directors and
Chief Executive Officers,
This letter outlines N C U A's
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 agency's 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, also known
as the G E N I U S Act.
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 union's
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 Examiner's Guide and the
following letters and guidance: Letter
23-CU-05, Commercial Real Estate
Loan Accommodations and Workouts.
Letter 23-CU-04, Update to
Interagency Policy Statement on
Allowances for Credit Losses.
Letter 14-CU-08, Home Equity Lines of
Credit Nearing Their End-of-Draw Period.
Letter 07-CU-13, Evaluating
Third Party Relationships.
Letter 03-CU-01, Loan Charge-off Guidance.
And Supervisory Letter
10-03, Concentration Risk.
Sensitivity to Market Risk and Liquidity.
Sensitivity to Market risk, particularly
Interest Rate Risk, or I R R, 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 union's 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 following resources: The
Examiner's Guide sections on Liquidity
and Sensitivity to Market Risk.
Letter 22-CU-09, Updates to Interest
Rate Risk Supervisory Framework.
Supervisory Letter 22-01, Updates to
Interest Rate Risk Supervisory Framework.
And the N C U A Liquidity
Risk Resources webpage.
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 union's 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 union's
size, complexity, and risk profile.
For more earnings- and capital-related
information, refer to the Examiner's
Guide section on Earnings.
Supervisory Letters 09-03,
Reviewing Adequacy of Earnings,
and 06-01, Evaluating Earnings.
And the N C U A Regulatory and
Compliance Resources webpage.
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 Council's
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 A's Fraud Prevention Resources
page for fraud prevention information.
Compliance Risk Management.
Bank Secrecy Act Compliance and
Anti-Money Laundering slash Countering
the Financing of Terrorism Programs.
The B S A landscape will continue
to evolve throughout 2026.
The Financial Crimes Enforcement Network,
or Fin C E N, 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 slash C F T regime.
Concurrently, Fin 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 slash 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 Fin 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 slash C F T programs
remain in compliance with changes.
The emphasis in 2026 will be on evaluating
your credit union's risk-based approach
to B S A compliance and how well the A
M L slash C F T program is tailored to
the credit union's 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 agency's B S
A slash 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 A's 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.