2021 Credit Union Resiliency, 2022 Supervisory Priorities

compass needle pointing to 2022
Lisa Hochgraf Photo
Senior Editor

4 minutes

At Directors Conference, NCUA Board Member Rodney Hood took stock in pandemic resiliency and described upcoming areas of regulatory focus.

Chairman of the National Credit Union Board when the pandemic hit, the Honorable Rodney E. Hood took stock last week in the fact that credit unions have fared well during the pandemic. He also offered his thoughts on what’s coming next for them in terms of NCUA’s supervisory priorities.

Credit Unions’ Resiliency Shows in the Data

Having continued as a member of the NCUA board when the Honorable Todd M. Harper became chairman in January, Hood told the more than 500 in-person and remote attendees of Directors Conference that credit unions had done well during the pandemic and that the data bore this out.

“You have been resilient,” he said.

Hood cited statistics from third quarter 2021 call reports that showed that U.S. credit unions are indeed doing well, despite the incredible challenges and uncertainty brought in by the pandemic. For example:

  • Credit unions have grown by 5 million member-owners in the first three quarters of the year.
  • Credit union assets are up $230 billion since the same time last year—and collectively the system has $2 trillion in assets.
  • Credit unions overall have seen a 5.8% increase in lending year over year.

“You all are providing member-owners with the loans that they need to have cars to go to and from work,” Hood said. “You’re providing those entrepreneurs with the loans that they need to create sustainable businesses. You’re providing those homeowners with the sustainable mortgages they need to have shelter for their families. It’s because of your lending efforts. I’m sure it’s because of your resiliency—that’s the reason we’ve been able to see the uptick in the number of credit union-owners coming to the credit union system.”

Examiners’ Priorities in 2022

Hood also described what NCUA regulators will be looking at most closely during credit unions’ 2022 examinations.

Top on his list were cybersecurity and data protection. “Bad actors … want to do us harm,” he said, encouraging attendees to “build a fortress” to keep member and credit union data safe and sound. He highlighted NCUA’s cybersecurity resources for credit unions.

Next up on NCUA’s examination priorities in Hood’s view is for NCUA to work with credit unions to implement the new current expected credit loss model. Hood said that although the new accounting standard makes a lot of sense for larger banks, he fought against it being a requirement for credit unions—and is glad that credit unions with $10 million in assets or more are exempt.

NCUA hopes to help smooth this transition for affected credit unions, Hood said, by allowing them to bring CECL online over three years rather than one. “We will be working with all of you to help you navigate and mitigate this current expected credit loss model,” he said.

Third, Hood said NCUA would continue to help credit unions help their members under the 2020 Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act. Throughout the pandemic, he said, “we wanted you to do the TDRs (troubled debt restructurings), the loan modifications, all that it would take to keep our credit union owners” financially healthy, he said. He noted that examiners will be “looking at did you reserve appropriately for some of the loan modifications.” He also emphasized: “You will not be held responsible for prudent pragmatic activity to help your member-owners.”

Before taking questions from the audience about everything from cryptocurrency to mergers to serving legal marijuana businesses, Hood outlined his own priorities for the future of credit unions (as he did in this episode of the CUES Podcast, which was recorded while he was chairman). These included:

  • finalizing NCUA’s upcoming budget;
  • continuing his focus on financial inclusion and diversity, equity and inclusion—including the ACCESS program he started while chairman;
  • the interactions between fintechs and credit unions;
  • remote examinations using NCUA’s MERIT system; and
  • readying the landscape for credit unions to safely include cryptocurrency in their offerings.

“We’re all in this together when it comes to looking after the needs of our credit union system today,” Hood said. “Credit unions have gotten through, I would like to think, the worst of the pandemic with great success and aplomb. I think we have some wonderful tools as we try to hopefully navigate towards a recovery. Again, with the strong liquidity and the strong capital, I think it bodes well for a very bright future in the credit union system.”

Lisa Hochgraf is senior editor for CUES.

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