NCUA Board Member Todd M. Harper speaks at the 2025 Volunteer Leadership Institute Conference.
As Prepared for Delivery on January 29, 2025
Aloha and good morning, everyone, and thank you, Jeff, for the warm welcome and kind introduction. Thanks as well to the Voluntary Leadership Institute for inviting me to join you in beautiful Hawaii again this year.
Earlier this morning we heard about the progress being made in the recovery efforts from the terrible wildfires that struck Maui in August 2023. The disaster is still fresh in the memories of those grieving and rebuilding their lives. And, it left a deep wound from which residents of the Valley Isle, including credit union members, are still trying to heal. It’s encouraging, however, to know that Hawaii’s credit unions continue to support their fellow Hawaiians to recover financially from that truly devastating experience.
Sadly, we’re now seeing similar tragic headlines with the wildfire crisis in the Los Angeles area. Our hearts and thoughts are certainly with the families who lost loved ones and their homes, the evacuees desperately seeking a return to stability and normalcy, and the brave firefighters risking their lives to tame the catastrophic wildfires. Amidst the heartbreak there have been many stories of selflessness and generosity, including demonstrating the embodiment of the credit union movement’s founding principle of “people helping people.”
Unfortunately, the Maui and L.A. wildfires underscored the credit union system’s need to account for these types of events when lending decisions are made and managing those risks once the loans are on the books. To address this issue, the NCUA will be updating its 2006 disaster preparedness guidance to reflect lessons learned from recent hurricanes like Helene and Milton, the wildfires in Hawaii and California, and other natural disasters.
We also need to educate our examiners about best practices for assessing risks associated with loans for electronic vehicles, solar panels, energy efficiency, and related products. Ultimately, a credit union is in the best position to assess its climate-related financial risks, but the NCUA can assist those efforts by providing the tools credit unions need to make better decisions.
In a similar way, the NCUA supervisory priorities for 2025 also emphasize active leadership and foresight. This year’s priorities are credit risk; balance-sheet management and risk to earnings and net worth; cybersecurity; and consumer financial protection. Also included in the announcement of the supervisory priorities were updates on the NCUA’s examination flexibility initiative and the Minority Depository Institution Preservation Program.
In its 2025 priorities letter, the NCUA acknowledged ongoing concerns with loan performance, delinquency rates, and charge-offs at credit unions. The rising interest rate environment put pressure on credit union earnings in 2023 and 2024. And, with recent declines in interest rates, higher yielding loans and investments are prone to prepayment, which could accelerate as rates drop, reducing interest income from longer-duration assets. As such, examiners will analyze a credit union’s current and prospective sources of earnings and liquidity as well as the composition of its net worth to better understand potential concentration risks and liquidity positions.
Cybersecurity also remains a top supervisory priority as cyberattacks against all industries, including credit unions and the vendors they use, become more prevalent and sophisticated. Recent news headlines warning of the extent of Chinese hacking operations targeting U.S companies and federal agencies are a stark reminder of the dangers we face and the damage that can occur. And, the growing list of organizations that have been breached in the public and private sector, including several credit unions, reminds us of the capabilities of our adversaries.
What’s more, the interconnectedness of the global financial system provides more opportunities and avenues for bad actors to perpetrate a cyber incident like a ransomware strike, a denial-of-service attack, or even the theft of money through sophisticated malware. A loss or compromise in the confidentiality, integrity, or availability of systems or information may lead to fraud as well as financial and reputational loss for financial institutions.
In other words, cybersecurity is everyone’s responsibility — credit unions, others in the financial services industry, the NCUA, the entire U.S. government, and all citizens. Credit union board members like you have an important role to play to ensure your credit union’s cybersecurity defenses and policies are current, followed, and frequently reviewed. I encourage you all to make such cybersecurity reviews a priority for 2025 during your board meetings and discussions with management.
In 2025, the NCUA will also prioritize compliance with consumer financial protection laws and regulations. Each year, the NCUA selects on a rolling and risk-focused basis several consumer financial protection regulations to address. Examinations this year will focus on consumer financial protection issues like overdraft programs with unfair practices like disproportionate fees to overdraft costs, multiple representment fees, and authorizing positive while settling negative; fair lending; the Home Mortgage Disclosure Act and Regulation C; the Military Lending Act; and the Electronic Fund Transfer Act and Regulation E. These areas of focus will strengthen the agency’s efforts to both ensure the safety and soundness of the credit union system and protect credit union members.
Since its creation in 1970, the NCUA — like the credit unions it regulates and insures — has grown and evolved to address a constantly changing national economy, advances in financial technology, and new consumer preferences. And, looking ahead, the NCUA turns 55 years old on March 10. As with any milestone, this anniversary is a reflection point to take stock of the agency’s work over the years and think critically, creatively, and responsibly about the work left to accomplish.
For the agency, highlights from the last five-and-a-half decades include establishing the Central Liquidity Facility in 1979; adopting the CAMEL rating system in 1987 and adding the market sensitivity “S” in 2022; establishing the framework for multiple common-bond credit unions and minimal leverage capital ratios in 1998; collecting quarterly Call Report data from credit unions in 2001; making permanent the $250,000 insurance protection for shares and deposits in 2010; launching our consumer website, MyCreditUnion.gov, and in compliance with the Dodd-Frank Act, creating the Office of Minority and Women Inclusion in 2011; strengthening the capital standards for complex credit unions with more than $500 million in assets with the implementation of the risk-based capital and complex credit union leverage ratios in 2022; and implementing the cyber incident notification rule in 2023.
Those are just a few of the NCUA’s many highlights during the last 55 years. And, we have seen that the exponential growth of the federally insured credit union system poses both opportunities and risks. What began with paper ledgers, volunteers meeting on factory floors — including that soap factory where my grandpa worked — limited hours of service, and simple appliance and character loans has evolved into a modern financial system that includes 24/7 mobile and online services, automated underwriting, a complex system of third-party service providers, and a full array of financial products and services.
The system now holds more than $2.3 trillion in assets, comprises nearly 4,500 federally insured credit unions, and serves more than 142 million members. With this growth in the credit unions’ size and complexity, the NCUA must continue to anticipate, innovate, and adapt to meet future challenges. For example, the use of artificial intelligence, instant payments, and distributed ledger technology, like blockchain, must be balanced with understanding the risks of electronic payment fraud, automated bias, and unregulated third-party vendors.
These economic conditions call for strong and dynamic leadership for the system of cooperative credit to navigate the choppy waters, not unlike the water we see in the Pacific Ocean just outside this conference room, and reach its full potential.
So, let me be clear on this point: Now is the time for active, not passive management, by credit union boards. That starts with rededicating yourselves to advancing your members’ financial well-being and financial security. And, that means keeping members informed, proactively seeking their input, safeguarding their savings with robust internal fraud controls and cyber defenses, and protecting their many consumer financial protection rights.
Boardrooms should never become echo chambers in which credit union boards rubber stamp executive decisions. Member-owners should have open and direct lines of communication with their board members and senior management to ask important questions, voice crucial concerns, and challenge decisions made on their behalf.
In other words, we need you — as board members — to think critically, manage strategically, and communicate effectively. After all, NCUA counts on board members like you to be the front-line defense against future problems. When you proactively prevent or solve a problem, you save the NCUA the time, energy and money needed to solve it for you.
With that, let me close with a uniquely Hawaiian expression, to live “pono.” The phrase roughly translates to living in balance and harmony with the world, others, and oneself. It’s something that I’ve thought a lot about this last year as I underwent double cervical disc replacement surgery and a lengthy recovery.
It’s also a guiding principle that’s taught to Hawaiian children from a young age and is associated with the aloha spirit. In the same vein, by working together, regulators and industry can ensure that as the credit union system grows and evolves, it remains true to its statutory mission and commitment to serve all members, especially those of modest means. In doing so, we can best position the credit union system for success for generations.
Thank you again and mahalo for the kind invitation.