Credit Union Operations

NCUA Instruction 5000.20, Examination Scope, details the review areas to assess strategic risk for the defined-scope SCUEP and the RFE Program. The RFE baseline review areas include certain credit union operations, programs and services, concentrations of risk, policies and procedures, and other areas of elevated risk in the credit union industry.

1. Evaluate credit unions’ composite and component CAMELS ratings using Letter to Credit Unions 22-CU-05, CAMELS Rating System. Examiners will not criticize a credit union’s efforts to provide prudent relief for members when such efforts are conducted in a reasonable manner with proper controls and management oversight. However, examiners will consider whether such efforts elevate, or reduce, a credit union’s risk exposure. If a credit union has taken on additional risk, even if done prudently, this may be reflected in the credit union’s applicable CAMELS and risk ratings. The June 2020 Interagency Examiner Guidance for Assessing Safety and Soundness Considering the Effect of the COVID-19 Pandemic on Institutions contains additional considerations when assigning CAMELS component and composite ratings.
2. Evaluate a credit union’s seven risk categories using the risk indicator ratings located in the Risk-Focused Examinations chapter of the Examiner’s Guide. The seven risk indicator ratings are a forward-looking assessment and should correlate to the CAMELS ratings. Examiners should assess the adequacy of a credit union’s risk management as it relates to COVID-19, including its system of internal controls. A credit union’s failure to establish a management structure that adequately identifies, measures, monitors, and controls the risks involved in its various products and business lines is considered unsafe and unsound conduct.
3. Examiners should issue formal and informal administrative action as appropriate. When considering whether to take administrative action in response to issues related to the pandemic, examiners will consider whether credit union management has implemented prudent policies and is pursuing realistic resolution of the issues confronting the institution. Formal or informal administrative action that would ordinarily be considered for lower-rated institutions may not be necessary. In instances where a formal or informal supervisory response is warranted, examiners should consult with their immediate supervisor and tailor their response to management's capabilities and efforts in resolving the credit union’s specific issues.
4. Examiners should exercise flexibility in scheduling follow-up plans. When scheduling follow-up plans, examiners should consider the extent to which a credit union’s problems are a direct result of external factors related to COVID-19 and its impact. In order to understand the impact COVID-19 is having on a credit union’s operations and financial trends, examiners should monitor these trends through off-site processes. Maintaining open and transparent communication with credit union management will aid examiners in fully understanding the unique situation of each credit union in their district.

Last updated on September 15, 2021