NCUA inspector general eyeing exam fraud, concentration risk for 2020

The National Credit Union Administration's Office of the Inspector General has outlined its 2020 priorities for the credit union regulator’s annual performance plan.

Among the OIG’s considerations include analyzing NCUA’s fraud-detection techniques in exams, cyber threat prevention and concentration risk in real estate and auto lending pipelines. The credit union regulator’s hiring practices are also on the examination docket.

The 2020 focus of fraud detection follows one of 2019’s most high-profile credit union failures, the liquidation of CBS Employees Federal Credit Union, as well as the ongoing fallout from the taxi medallion lending crisis. NCUA’s report noted that a lack of review by a certified public accountant may have contributed to credit union failures, and in the year ahead OIG plans to review the effectiveness of NCUA’s fraud-detection techniques during exams.

While auto loan delinquencies have been on the decline since 2012, according to data from the Federal Reserve Bank of New York, auto loans and real estate constitute nearly 85% of total credit union lending. If widespread issues arise in either of those categories, that could pose a risk to the National Credit Union Share Insurance Fund. Still, overall delinquencies at credit unions continue to trend downward, dropping to 0.65% in October, according to CUNA Mutual Group, and new auto sales are expected to drop between 3% and 4% in the coming year because of a slowdown in U.S. economic growth, according to the same report.

NCUA will also have its eye on data security and information technology, including in-house practices. NCUA received scrutiny from its OIG back in May for failure to manage its own IT equipment, with that report concluding the agency did not adequately monitor, account or dispose of its IT materials. In 2020 the inspector general will determine if the NCUA has efficient policies for disposal of the regulator’s data and other personally identifiable information.

Looking beyond the presidential election year, the OIG indicated the potential in reviewing member business lending in 2021 to determine if NCUA is effectively mitigating risk there.