NCUA: Here's What Examiners Look For In ERM Systems

ALEXANDRIA. Va. — NCUA clarified its expectations regarding credit unions' enterprise risk management systems in a recent supervisory letter.

The letter, released earlier this month, noted that sound ERM is crucial to the success of any credit union, but effective risk management can take different approaches.

Natural-person credit unions are not required to implement a formal ERM framework, according to the letter, signed by Larry Fazio, director of the administration's Office of Examination & Insurance.

That's because the NCUA recognizes "most credit unions do not possess the size, depth of resources, or range and level of risk exposure to warrant the significant investment necessary to implement such a program."

These credit unions, however, are expected to have "sound processes sufficient to manage the risk associated with their business model and strategies."

In large and complex natural-person credit unions, examiners "should ensure the credit union employs a comprehensive risk management approach, which may or may not include a formal ERM program."