The National Credit Union Administration (NCUA) promised to continue its policy of “no regulation by enforcement” in a letter describing its “2026 Supervisory Priorities,” including details about the agency’s risk-based approach to examining credit union lending practices.
The agency emphasized that it is committed to streamlining its examination processes while still ensuring that its supervisor policies encourage safety and soundness without creating undue burden for covered entities.
It further noted that asset quality deterioration and elevated loan losses remain material contributors to balance sheet stress before describing its approach to monitoring the risk associated with these factors. As loan performance shows increased pressure, examiners will review credit risk management practices, underwriting standards and liquidity planning.
“To assess lending practices and overall credit risk, NCUA examiners will focus on credit union lending and related risk-management practices,” the agency wrote. “Specific review areas will focus on institution-specific risks and may include the sufficiency of credit administration, including loan underwriting, loss mitigation programs (including loan modifications and workouts), Allowance for Credit Loss reserves and methodologies, and charge-off practices.”
NCUA examiners will be tasked with assessing a credit union’s third-party risk-management practices for circumstances in which an institution’s lending, servicing or collection functions are outsourced. They also will be required to review an institution’s portfolio monitoring practices, including the management of any material credit risk concentrations.
As loan growth has moderated and loan performance has declined in recent years, the overall delinquency rate and the rolling 12-month loss rate among federally insured credit union loan portfolios have reached their highest points in more than a decade, according to the letter.
Additionally, the letter described NCUA’s ongoing focus on risk-based supervision, which entails tailoring the scope of examinations to a credit union’s unique risk profile.
“Recent liquidity challenges have reinforced the importance of diversified funding strategies and robust liquidity risk management,” the agency wrote. “Accordingly, credit unions should expect continued supervisory focus on these areas to ensure institutions can withstand a range of interest rate and funding stress conditions.”
There will also be an ongoing emphasis on fraud prevention, payment systems security, and implementing provisions of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, according to the letter.
The agency noted its ongoing collaboration with the Financial Crimes Enforcement Network (FinCEN) and other federal financial institution regulators with respect to strengthening Bank Secrecy Act (BSA) compliance and anti-money laundering/countering the financing of terrorism (AML/CFT) programs.
Specifically, the agencies are working to implement provisions of the Anti-Money Laundering (AML) Act of 2020 designed to modernize and strengthen the U.S. AML/CFT regime. Concurrently, FinCEN and the regulators have been evaluating methods of reducing BSA compliance burdens while helping financial institutions maintain effective, risk-based AML/CFT programs.