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NCUA Vice Chairman Kyle S. Hauptman Statement on the NCUA’s Enterprise Risk Appetite Statement

October 2022
NCUA Vice Chairman Kyle S. Hauptman Statement on the NCUA’s Enterprise Risk Appetite Statement
Kyle S. Hauptman

NCUA Vice Chairman Kyle S. Hauptman delivers remarks during the October 2022 NCUA Board Meeting at the NCUA’s headquarters in Alexandria, Virginia.

As Prepared for Delivery on October 20, 2022

Thank you, Rendell and Jim for the presentation and to everyone who worked on pulling the Enterprise Risk Appetite statement together. On its own, this is an important document for management. As you pointed out, it also informs the strategic and annual performance plans. Which makes it makes it an important operational document as well. From supervisory priorities, to capital, to the Share Insurance Fund, the NCUA’s views on risk directly affect credit unions and members.

Over the past two years we’ve learned a lot about our tolerance of risk. For instance, this is our first week back in the office and just our second in person board meeting.

When deposits flooded into credit unions, and net worth ratios were dropping, we came close to calling for a premium for the Share Insurance Fund. It took courage and patience to battle back our aversion to risk. In hindsight it was the right decision as it allowed credit unions to keep helping members rather than making us more comfortable. The beneficiaries were credit union members – average consumers.

There were many difficult lessons learned during the pandemic, especially for credit unions that had put off digital transformation projects. They either had to scramble to get projects done or ride out the pandemic without them. We know there are risks in acting, but not doing something is also a risk.

There are a lot of reasons why a credit union might not want to move forward with a project. One of those considerations could be how an examiner might view the risk of spending of capital to achieve business goals.

I want to thank staff and my fellow Board members for acknowledging the importance of taking risks to innovate and prepare for the future — for the agency and for credit unions. The Risk Appetite statement addressed this in several places.

  • Encourage consistency in understanding, measuring, and managing risk across the enterprise while fostering credit union system innovation and growth.
  • Acceptance of some risk is often necessary to foster innovation and agility.
  • Ensuring credit unions manage their risk…and maintain their ability to evolve and compete effectively through innovation.
  • Implementation of policies and regulations to address emerging and innovative products and technologies that foster credit union system competitiveness, consistent with consumer financial protection.

Statements like these communicate the NCUA’s risk tolerance. They also help us resist the urge to focus on short-term risk at the expense of the future.

Mr. Chairman, that concludes my remarks. I have one question.

If a credit union prepared a business plan to grow through innovation or technology, but that plan made it necessary to spend capital — potentially reducing their capital — should they expect their CAMELS rating to dip?

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