WASHINGTON NCUA told a key lawmaker last week the agency is issuing new guidance to examiners on concentration risk and plans to amend its prompt corrective action regulation this fall to place additional emphasis on the risks posed to the balance sheet by concentrations of real estate and member business loans and loan participations.
In a letter sent Friday to Rep. Darrell Issa, the chairman of the House Committee on Oversight and Government Reform, NCUA’s Inspector General said the agency is training its examiners to better evaluate and manage concentration risk. Among other things, NCUA has enhanced its quarterly regional risk reports to better detect growth of various loan and investment products; updated risk reports to identify concentration risk; and issued credit union and supervisory guidance addressing concentration risk and how to mitigate it.
NCUA is also updating its Automated Integrated Regulatory Examination Software, known as AIRIES, to better guide examiners to review concentration risk. The agency added a worksheet to AIRIES to help examiners identify increasing levels of concentration risk.
NCUA expects to issue a letter to credit union in September that will revise the risk-based component of the PCA regulation by placing additional emphasis on the various concentrations of credit on the balance sheet. As a result, the minimum net worth level will be based more on the level of concentrations in the financial position of each credit union than it is now. Implementation is expected September 30.
