ALEXANDRIA, Va.-NCUA's examiners will be focusing in the second half of the year on credit unions' ability to manage e-banking risk.
That is the word from Tim Segerson, deputy director of Examination and Insurance with the agency, who said that with all the attention being paid to mobile banking, NCUA is concerned about CUs quickly expanding e-services without strong plans to manage fraud and security risk in this area.
Segerson shared that guidance during an NCUA webinar last week on exam issues, which also addressed operations and balance sheet risk.
"We need to focus on e-banking because it is growing fast and can present sizeable losses in a short period of time," said Segerson. "Mobile banking brings with it new risks and the capability for risk to accelerate with great velocity compared with traditional services."
The deputy director said credit unions can expect examiners to spend time at the CU identifying key e-services risk areas, looking at architecture and personnel.
Can't Set & Forget
"This is an evolving area and not one the credit union can set and forget," cautioned Segerson, who said examiners will be paying attention to security controls commensurate with the credit union's size and scale. "They will expect to see you have thought out your risk control processes, worked with vendors or internally to establish appropriate levels of controls around your menu of e-services. They will look for mitigation and escalation procedures."
Examiners will receive new training around e-services risk shortly, added Segerson. He said after training is completed, NCUA will release to CUs the questionnaire and work program from the training so credit unions can better understand what examiners will be looking for.
On the operations side, expect examiner attention to be paid to controls that prevent internal fraud, a large and growing loss area. The credit union's audit process will garner more interest as well, said Segerson, with the agency looking for more periodic reviews throughout the year and not just one annual audit.
"We will not just look at the audit, but make sure to see how you have responded to the audit to make sure you are keeping good controls."
In addition to interest rate risk, which NCUA has been focusing on for some time, Segerson noted liquidity risk will also gain more share of examiners' time. "Interest rate risk can lead to a slow heart attack, but liquidity risk can bring a quick death."
With CUs no longer having the Central Liquidity Facility as a safety net, Segerson said NCUA will be looking to see if credit unions have contingent funding policies in place scaled to the level and sophistication of the organization.
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