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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 the
Discontinuation of Risk Ratings and
the Elimination of Reputational Risk.
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 Discontinuing
the Use of Risk Ratings.
To the Board Chairperson
and Chief Executive Officer.
In response to several recommendations
provided through Ask N C U A and
to the Chairman directly, N C U A
is discontinuing the use of risk
ratings for the Risk Categories, also
referred to as Risk Areas, for the
examination and supervision program.
Disclosing and supporting these
ratings was often duplicative of
discussions related to CAMELS ratings.
Also, the N C U A does not use risk
ratings for material supervisory
determinations or examination scheduling.
Historically, examiners assessed the
amount and direction of risk exposure
in seven Risk Categories: Credit,
Interest Rate, Liquidity, Transaction,
Compliance, Reputation, and Strategic.
Each risk category was assigned
an individual risk rating of
High, Moderate, or Low, which was
disclosed in examination reports.
Changes to the N C U Aâs examination
system and policy manual in July twenty
twenty five removed the requirement
for N C U A field staff to disclose
risk ratings in examination reports.
With the September twenty twenty five
update to the agencyâs examination
system, called MERIT, examiners will
not assign a rating or the direction
of risk to the Risk Categories.
N C U A will continue to use Risk
Categories to categorize review
areas and documents requested.
While N C U A examiners will no
longer assign ratings to each risk
area, examiners will still assess
risk in credit unions and consider
a credit unionâs risk profile as
part of assigning CAMELS ratings.
While ratings will not be assigned to
risk areas, examiners may still refer to a
specific type of risk, for example credit
risk, as high or elevated when supporting
CAMELS ratings or corrective actions.
These changes are not expected to
materially change a credit unionâs
examination or examination report.
We expect the examination reports
and other communications with credit
unions will be more streamlined as
examiners will focus on addressing
material concerns and explaining
the credit unionâs CAMELS ratings.
If you have questions, please
contact your regional office.
N C U A Eliminates Use
of Reputational Risk.
Agency Ceases Using Reputational
Risk and Equivalent Concepts.
Alexandria, Virginia.
September twenty fifth,
twenty twenty five.
The National Credit Union Administration
today announced it has ceased using
reputation risk and equivalent concepts in
the examination and supervisory process.
These updates follow White House
Executive Order fourteen three three
one guaranteeing fair banking for
all Americans, which requires federal
banking regulators to remove the use
of reputational risk or equivalent
concepts that could result in
politicized or unlawful debanking.
N C U A employees will no longer base
supervisory concerns on reputation
risk, nor will they refer to or
engage in discussions about reputation
risk as part of examinations and
supervision contacts of a credit union
or credit union service organization.
The agency will continue to include key
review areas historically classified
under reputation risk, like financial
liability associated with active
litigation and insider abuse, as
part of an examination as necessary.
N C U A is currently reviewing
and updating regulations, manuals,
guidance, and training materials to
remove references to reputation risk.
While these changes are made, the
N C U A issued a Letter to Credit
Unions that supersedes any prior
direction on reputation risk in
other N C U A manuals or guidance.
In addition to eliminating reputation
risk, N C U A has discontinued
the practice of assigning ratings
to the Risk Categories, also
referred to as Risk Areas, for the
examination and supervision program.
Historically, examiners assessed the
amount and direction of risk exposure
in seven Risk Categories: Credit,
Interest Rate, Liquidity, Transaction,
Compliance, Reputation, and Strategic.
This change is in response to several
recommendations provided through Ask N
C U A and to Chairman Hauptman directly.
N C U A does not expect these changes
to materially change a credit unionâs
examination or examination report.
Examination reports and other
communications with credit unions
will be more streamlined as
examiners will focus on addressing
material concerns and explaining
the credit unionâs CAMELS ratings.
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.