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NCUA’s 2021 Supervisory Priorities

21-CU-02 / January 2021
NCUA’s 2021 Supervisory Priorities
Federally Insured Credit Unions
Examination Program
Federally Insured Credit Unions
NCUA’s 2021 Supervisory Priorities

Dear Boards of Directors and Chief Executive Officers:

This letter outlines the NCUA’s supervisory priorities for 2021, and it will assist you in preparing for your next NCUA examination.

The NCUA remains committed to focusing its examination activities on the areas that pose the highest risk to the credit union industry and the National Credit Union Share Insurance Fund. We understand the challenges credit unions are facing because of the COVID-19 pandemic. The NCUA is steadfast in its commitment to respond to the ongoing pandemic with guidance, policies, and procedures that reflect the current economic climate, as well as efforts to increase the efficiency of the supervision program.

The NCUA will maintain its commitment to the extended examination cycle, and qualifying credit unions will be scheduled accordingly in 2021.1 The targeted Small Credit Union Exam Program exam procedures remain in place for most federal credit unions with assets under $50 million. For all other credit unions, NCUA examiners will conduct risk-focused examinations, which concentrate on areas of highest risk, new products and services, and compliance with applicable laws and regulations.

For additional information on the NCUA’s COVID-19 response efforts, visit the NCUA’s Coronavirus (COVID-19): Information for Federally Insured Credit Unions and Members webpage.

Supervisory Priorities

The NCUA’s primary areas of supervisory focus are discussed below.2

Allowance for Loan and Lease Losses (ALLL)

Due to the ongoing economic impact of the COVID-19 pandemic and the Financial Accounting Standards Board’s decision to delay its requirement to comply with the current expected credit losses (CECL) standard until January 2023, NCUA examiners will not be assessing credit unions’ efforts to transition to the CECL standard until further notice. The NCUA encourages credit unions to continue to assess their needs and evaluate methodologies for the eventual implementation of the CECL standard.

Credit unions must still maintain an ALLL account in accordance with FASB Accounting Standards Codification (ASC) Subtopic 450-20 (loss contingencies) and/or ASC 310-10 (loan impairment). An appropriate allowance methodology will consider all relevant and available information when assessing the collectability of the loan. This includes changes to a borrower’s financial condition, collateral values, and economic conditions because of the pandemic. NCUA examiners will be evaluating the adequacy of credit unions’ ALLL accounts by reviewing:

  • ALLL policies and procedures;
  • Documentation of an ALLL reserving methodology, including modeling assumptions and qualitative factor adjustments;
  • Adherence to generally accepted accounting principles; and
  • Independent reviews of credit union reserving methodology and documentation practices by the Supervisory Committee or by an internal or external auditor.

For more information, see Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised).

Bank Secrecy Act/Anti-Money Laundering Compliance

The NCUA will continue to conduct Bank Secrecy Act/Anti-Money Laundering (BSA/AML) reviews during every examination, and will take appropriate action when necessary to ensure credit unions meet their regulatory obligations.

The NCUA meets regularly with interagency partners to improve the transparency, efficiency, and effectiveness of BSA/AML regulation and supervision. Key accomplishments by the interagency working group include:

The NCUA will continue to communicate with credit unions and collaborate with other banking
regulators and law enforcement on several initiatives, including:

  • Publishing additional updates to the FFIEC’s BSA/AML Examination Manual;3
  • Participating in interagency work-streams to define BSA/AML compliance program effectiveness;
  • Developing suggestions and clarifications to improve Suspicious Activity Report (SAR) and Currency Transaction Report (CTR) filings; and
  • Increasing human trafficking awareness by providing information to credit unions and examiners.

The NCUA will continue to focus on implementing appropriate customer due diligence and beneficial ownership procedures, proper filing of SARs and CTRs, and reviews of bi-weekly 314(a) information requests from FinCEN. Law enforcement, intelligence, and counterterrorism officials depend on timely and informative SARs and CTRs and prompt reporting of any 314(a) matches to identify and thwart money laundering, terrorist financing, and other illicit financial activities. Credit union efforts in this area help fight crime and keep America safe.

For additional resources, visit the NCUA’s Bank Secrecy Act Resources webpage.

Coronavirus Aid, Relief and Economic Security Act

The Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law on March 27, 2020 and provided several relief measures for credit unions and their members. The Consolidated Appropriations Act, 2021 enacted in December 2020 extended several CARES Act provisions. For examination purposes, examiners will continue to review compliance with the provision of the CARES Act that suspended the requirement to categorize certain loan modifications as troubled debt restructurings or TDRs. This provision was extended, through January 1, 2022.

NCUA examiners will continue to review credit unions’ compliance with the CARES Act and Consolidated Appropriations Act, 2021, including requirements for financial institutions related to the administrative provisions for the additional 2020 recovery rebates for individuals. In addition, NCUA examiners will continue to review, as needed, modifications, credit reporting, forbearances, and foreclosures that were conducted in 2020 under CARES Act provisions. For more information, see NCUA Letter to Credit Unions 20-CU-07, Summary of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and NCUA Letter to Credit Unions 21-CU-01, Summary of the Consolidated Appropriations Act, 2021.

Consumer Financial Protection

The COVID-19 pandemic continues to affect consumers, which increases consumer compliance risk in certain areas. The NCUA will continue to examine for compliance with applicable consumer financial protection regulations during every federal credit union examination. The scope of each examination’s consumer compliance reviews is largely risk-focused, and is based on the credit union’s compliance record, products and services provided, and any new or emerging concerns.

The NCUA selects the specific priorities by analyzing trends in violations identified through examinations, member complaints, recent changes to regulatory requirements, and how much time has passed since a regulation was last required to be reviewed by examiners. In 2021, examiners will focus on Fair Lending and areas related to the COVID-19 pandemic.

Examiners will assess a credit union’s Fair Lending Compliance Management System. Reviews will include areas such as board and management oversight, policies and procedures, training, monitoring and corrective action, and member complaint response.

Credit Risk Management

The NCUA continues to encourage credit unions to work with their members who were affected by the COVID-19 pandemic. The NCUA reaffirms that examiners will not criticize credit unions’ efforts to provide prudent relief for borrowers, when such efforts are conducted in a reasonable manner with proper controls and management oversight.

NCUA examiners will continue to place emphasis on the review of credit unions’ loan underwriting standards and credit risk-management procedures. NCUA examiners will focus on any adjustments credit unions made to lending programs to address borrowers facing financial hardship because of the COVID-19 pandemic. NCUA examiners will also focus on reviewing policies that address the use of loan workout strategies, risk-management practices, and new strategies implemented to provide funds to borrowers impacted by the COVID-19 pandemic, including programs that were authorized under the CARES Act and extended in the Consolidated Appropriations Act, 2021. In particular, NCUA examiners will evaluate credit unions’ controls, reporting, and tracking of these programs.

NCUA examiners will also verify that credit unions evaluated the potential impact their COVID-19 response and relief efforts will have on their capital position and financial stability. Credit unions must demonstrate they understand and are continually evaluating credit risks specific to this crisis.

Credit unions’ risk-monitoring practices should be commensurate with the level of complexity and nature of their lending activities. Credit unions should maintain safe and sound lending practices and comply with consumer disclosure and regulatory reporting requirements.

For more information, see:

Information Systems and Assurance (Cybersecurity)

Emerging cyber-attacks are a persistent threat to the financial sector, and the likelihood of these threats adversely affecting credit unions and consumers continues to increase because of:

  • Advances in financial technology;
  • An increase in a remote workforce; and
  • Growing adaptation of mobile technology for financial transactions.

The NCUA continues to promote cybersecurity hygiene in credit unions, and reviews of credit union information systems and assurance programs remain a supervisory priority for the agency. Building upon its outreach efforts to the industry in 2020, the NCUA will continue to provide guidance and resources to assist credit unions with this critical threat.

As cited in the NCUA’s updated supervisory priorities for 2020, the agency has reprioritized away from performing facilitated Automated Cybersecurity Evaluation Toolbox (ACET) cybersecurity maturity assessments, to piloting the Information Technology Risk Examination for Credit Unions (InTREx-CU). InTREx-CU harmonizes the IT and cybersecurity examination procedures shared by the Federal Deposit Insurance Corporation, the Federal Reserve System, and many state financial regulators. This establishes a consistent approach across all community-based financial institutions. The InTREx-CU will continue to be deployed in 2021, allowing examiners and credit unions to identify and remediate potential high-risk areas by identifying critical information security program deficiencies. ACET will become a self-assessment resource for credit unions, supported by the NCUA.

The NCUA has also published information for credit unions on the increased cybersecurity threats resulting from the pandemic and provided additional resources for protecting their members. For more information, visit the NCUA’s Cybersecurity Resources.

LIBOR Transition

The NCUA continues to encourage credit unions to prepare for the expected discontinuation of the London Inter-bank Offered Rate (LIBOR). Credit unions that have LIBOR-based transactions or contracts should not delay their preparations for transitioning away from this interest rate benchmark.

The transition away from LIBOR can be a significant and complex undertaking. Credit unions’ transition plans should include risk-management processes to identify and mitigate their LIBOR transition risks.

Examiners will continue to educate credit unions on the transition in 2021, particularly those with significant LIBOR exposure or less-developed transition processes. For these credit unions, examiners will assess exposures to LIBOR and the safety and soundness of the credit unions’ preparation plans to transition to an alternative reference rate. Credit unions can continue using NCUA’s LIBOR Assessment Workbook for assistance in planning for the transition and refer to the July 2020 Interagency Statement for additional guidance.

Liquidity Risk

The economic impact of the COVID-19 pandemic may result in an increase in the volatility of share balances, loan demand, and loan losses. The resulting stress on credit union balance sheets could potentially require an increased level of liquidity management throughout 2021. Given the level of economic uncertainty, the NCUA encourages credit unions to broaden the range of possible scenarios used in their financial projections.

NCUA examiners will evaluate the suitability and scope of a credit union’s scenario analysis for liquidity risk management. A robust analysis will address scenarios that include:

  • Sudden and significant share outflows;
  • A broad range of possible interest rate paths to identify the potential variability in loan and securities cash flows;
  • Changes in cash flow projections for relevant factors, such as a change in prepayment speeds, decay rates, share compositions and volumes;
  • The effects of loan payment forbearance, loan delinquencies, projected credit losses and loan modifications on liquidity and cash flow forecasting;
  • The decline in credit quality and resulting market value of assets as it relates to external borrowing capacity, and;
  • Stress scenarios that include the reduction of available credit lines to ensure an adequate mix of diversified funding sources.

For more information and to access resources and guidance on liquidity risk, see the NCUA’s Examiner's Guide.

Serving Hemp-Related Businesses

The NCUA will continue to encourage credit unions to consider whether they are able to provide financial services to lawfully operating hemp-related businesses within their fields of membership safely and properly. Credit unions that choose to serve hemp-related businesses need to understand the complexities and risks involved, and secure the necessary expertise and resources to conduct this activity safely and soundly and in compliance with all applicable laws and regulations.

For more information, see NCUA Letter to Credit Unions, 20-CU-19, Additional Guidance Regarding Servicing Hemp-Related Businesses. Additionally, FinCEN issued guidance on June 29, 2020, to address questions related to BSA/AML regulatory requirements for hemp-related business customers.

Modernization Updates

NCUA Connect & Merit

In September 2019, the NCUA began piloting a new user portal, NCUA Connect, and a new examination tool, the Modern Examination and Risk Identification Tool (MERIT). NCUA Connect is a secure, common entry point for authorized users to access NCUA applications. Due to the COVID-19 pandemic, the NCUA delayed the rollout, training effort, and launch of these applications to all examination staff until the second half of 2021.

In the third quarter of 2020, the agency expanded the pilot of these applications and will continue to use MERIT in a pilot capacity until the broader rollout in the second half of 2021. Additional information about these applications is available on the NCUA’s website.

NCUA Exam Planning Questionnaire

The NCUA is incorporating the use of an Exam Planning Questionnaire into the examination planning process. The questionnaire will provide NCUA examiners with information on certain products and services, significant events, insider activities, and fraud awareness. NCUA examiners will provide the questionnaire to credit unions in advance of a scheduled exam, and will use the responses to refine the exam scope, increase offsite-monitoring capabilities, and incorporate efficiencies to the exam.

More information on the pilot of the Exam Planning Questionnaire will be forthcoming.


The NCUA remains committed to incorporating efficiencies into its examination and supervision program to address the effects of the COVID-19 pandemic on credit unions and their members. As the economic impact of the COVID-19 pandemic evolves, the NCUA will continue to provide the necessary guidance.  

If you have any questions about the NCUA’s supervisory priorities for 2021, please contact your NCUA regional office or state supervisory authority.



Rodney E. Hood


1 See the NCUA’s Exam Flexibility Initiative webpage for more information about which credit unions are eligible for an extended examination cycle. Additionally, the agency’s offsite posture will remain in place until further notice. Credit unions and NCUA staff will be provided ample notice before being subject to onsite work. Additional information will be provided well in advance of any change to the NCUA’s offsite posture.

2 If applicable to the activities of the credit union, these priorities apply to the NCUA’s examination of federal credit unions and, where relevant, to the NCUA insurance reviews of federally insured, state-chartered credit unions.

3 Future updates to the FFIEC BSA/AML Examination Manual will be added to the online FFIEC BSA/AML InfoBase. The current InfoBase includes the April 2020 updates.

Current Expected Credit Losses (CECL) Consumer Compliance Cybersecurity Flood Insurance Fraud Service Members
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