CU Compliance Connection

1. CU Compliance Connection NCUA 2014 Examination Focus

2. NCUA 2014 Examination Focus The information in this presentation comes from the NCUA Letter to Credit Unions 14-CU-02 and was provided by the NCUA to assist credit unions in preparing for the exam process in 2014.

3. NCUA 2014 Examination Focus “In 2014, NCUA will be working to ensure that credit unions identify and mitigate forward-looking risks before they threaten the viability of credit unions and the stability of the Share Insurance Fund.”

4. NCUA 2014 Examination Focus Interest Rate Risk Credit unions need to prepare for the raising rate environment. Even a slow, gradual increase in rates could have significant consequences for credit unions with high concentrations in certain long-term investments and loans. NCUA examinations in 2014 will focus on evaluations of credit risk, liquidity risk and concentration risk.

5. NCUA 2014 Examination Focus Cybersecurity Risk Credit unions must be able to assess and mitigate cybersecurity risk and respond to cyber-attacks. Credit unions of all sizes will be expected to implement appropriate risk mitigation controls – including vendor due diligence, strong password processes, proper patch management and network monitoring – to better prevent, detect, and recover from cyber-attacks.

6. NCUA 2014 Examination Focus http://www.fincen.gov/statutes_regs/guidance/pdf/fincenadv04262005.pdf

7. NCUA 2014 Examination Focus Private Student Loans In December 2013 the NCUA issued Letter to Credit Unions 13-CU-15 to clarify their expectations about direct and indirect private student loan products. The NCUA will evaluate each credit union’s student lending plans, policies, controls, and third-party due diligence.

8. NCUA 2014 Examination Focus • Loan Participation • The credit union will be expected to comply with the provisions of the Loan Participation Rule including: • A single-originator concentration limit of 100% of the credit union’s net worth or $5 million, whichever is greater, for purchasing credit unions. • A 10% risk-retention requirement for originating federal credit unions, as required by the Federal Credit Union Act; and a 5% risk-retention requirement for other originating eligible organizations (including federally insured, state-chartered credit unions, unless state law requires a higher percentage). • A limit of 15% on participation loans to one borrower.

9. NCUA 2014 Examination Focus CFPB Rules “In the early stages of CFPB’s newly effective mortgage rules, NCUA field staff will take into account each credit union’s good-faith efforts to comply.”

10. NCUA 2014 Examination Focus CUSO Rule All federally insured credit unions making loans to or investments in CUSOs must now require the CUSO to account for transactions using Generally Accepted Accounting Principles, prepare quarterly financial statements, and obtain annual audits of financial statements. A federally insured, state-chartered credit union that is or would be rendered less than adequately capitalized by additional investment in a CUSO must now obtain approval from its state regulator and notify an NCUA Regional Director prior to making the investment. By June 30, 2014, credit unions with CUSO relationships will need to update their written agreements to address the requirements of the new rule.

11. Thank you for joining me for this review of the 2014 NCUA Examination Focus Stay Tuned… Shawn Wolbert, CIA, CUCE Director CU System Relations 101 S. Washington Square, Suite 900 Lansing, MI 48933-1703 (800) 262-6285 Ext. 486 (734) 658-5427 Mobile Follow me on Twitter – Shawn Wolbert @ Go2CUGuru