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ALEXANDRIA, Va. (Oct. 24, 2016) – Smaller financial institutions, like credit unions, face a dangerous and growing threat to the safety and security of their data and sensitive information in the form of ransomware.

In the latest issue of The NCUA Report, NCUA’s Office Small Credit Union Initiatives details what ransomware is and the increasing role it plays in cyberattacks against smaller financial institutions. The article also provides resources that credit unions can use to prevent and respond to these attacks.

The October 2016 issue of The NCUA Report newsletter is available online here.

The agency’s newsletter features columns from NCUA Board Chairman Rick Metsger and Board Member J. Mark McWatters, as well as articles from several NCUA offices on the agency’s initiatives and information on supervisory, regulatory and compliance issues that are important to all federally insured credit unions.

Articles in this month’s issue include:

• New Technologies Mean New Risks and New Cybersecurity Demands
• Chairman’s Corner: Improving NCUA’s Exam Process for Efficiency, Effectiveness, Flexibility
• Board Member McWatters’ Perspective: Interest-Rate-Risk Supervision Should Not Result in Micromanagement
• Board Actions: Stabilization Fund’s Net Income in Second Quarter Tops $425 Million
• Planning and Testing Are Key to Being Able to Recover from a Disruption
• Reminder: Nominations for Consulting Services Due Nov. 30
• Outlook Looks Strong As the Fed Moves Closer to Raising Rates
• State Credit Union Data Show Growth in All Major Categories
• Submit Voluntary Diversity Checklist by Nov. 30

Published monthly, The NCUA Report is NCUA’s flagship publication. The newsletter highlights important Board activity and key issues that credit union managers, staff and volunteers need to know. If interested, you can subscribe to the online version of the newsletter here (opens new window). Previous issues of The NCUA Report are available online here (opens new window).

ALEXANDRIA, Va. (Oct. 24, 2016) – Thirty federally insured credit unions subject to civil monetary penalties for filing late Call Reports in the first quarter of 2016 have consented to penalties totaling $20,036, the National Credit Union Administration announced today.

In the first quarter of 2015, 15 credit unions consented to penalties.

Individual penalties ranged from $151 to $6,734. The median penalty was $274. The Federal Credit Union Act requires NCUA to send any funds received through civil monetary penalties to the U.S. Treasury.

“I’m disappointed the number of late filers has risen,” NCUA Board Chairman Rick Metsger said. “While we are still far below the levels of late filers of just a few years ago, the goal remains full compliance. I’d remind credit unions NCUA offers support if they run into problems meeting the Call Report filing deadline, and we hope they will take advantage of that assistance.”

A list of credit unions filing late in the first quarter and agreeing to pay civil monetary penalties is available online here (opens new window).

The assessment of penalties primarily rests on three factors: the credit union’s asset size, its recent Call Report filing history and the length of the filing delay. Of the 30 credit unions agreeing to pay penalties for the first quarter of 2016:

• Twenty had assets of less than $10 million;
• Nine had assets between $10 million and $50 million; and
• One had assets greater than $250 million.

No credit unions with assets between $50 million and $250 million were subject to civil monetary penalties for filing late Call Reports in the first quarter. Five of the late-filing credit unions had been late in a previous quarter.

A total of 40 credit unions filed Call Reports late for the first quarter of 2016. NCUA consulted regional offices and, when appropriate, state supervisory authorities to review each case. That review determined mitigating circumstances in three cases that led to credit unions not being penalized. Another six credit unions received a requested waiver. One credit union paid a civil monetary penalty to its state regulator.

NCUA informed the remaining credit unions of the penalties they faced and advised them they could reduce their penalties by signing a consent agreement. NCUA also said it would initiate administrative hearings against credit unions that did not consent.

NCUA sends reminder messages about Call Report filing deadlines that include information on how to receive technical support to handle filing problems. The agency also has created an automated reminder email system that contacts credit unions that have not filed their Call Reports and confirms successful filing.

NCUA’s Office of Small Credit Union Initiatives has dedicated an Economic Development Specialist to assist small credit unions in filing Call Reports on time. Credit unions that would like assistance should send an email to [email protected]. NCUA also has produced a video (opens new window) describing how to file Call Reports.

Hispanic Association of Colleges and Universities Lauds Internship Program

ALEXANDRIA, Va. (Oct. 25, 2016) – The National Credit Union Administration’s internship program has been recognized by the Hispanic Association of Colleges and Universities for its success providing opportunities for Hispanic students.

The association presented NCUA with the Outstanding Public Sector Partner Award at its 30^th annual conference in San Antonio.

“We are proud of the student intern program and the positive impact the young people who’ve worked here have had on our agency,” Director of NCUA’s Office of Minority and Women Inclusion Monica Davy said. “Through the program, we are able to arm our students with valuable work experience needed to compete in today’s workforce, while supporting the agency’s core objectives. It’s been wonderful watching our interns learn.”

Since 2012, NCUA has provided more than 50 internships for college students studying business, finance, accounting, human resources management and information technology.

Managed by NCUA’s Office of Minority and Women Inclusion, the student intern program provides undergraduate, graduate, law, and doctoral students with professional work skills and exposure to the work environment of a federal agency that may benefit their communities, assist with career decisions and potentially lead to employment with an agency like NCUA.

The Hispanic Association of Colleges and Universities is one of four partner organizations the agency works with to recruit and place interns. These organizations serve students from groups that traditionally have low participation rates in the workforce.

The association represents more than 450 colleges and universities committed to Hispanic higher education success in the United States, Puerto Rico, Latin America and Spain. The association’s headquarters are located in San Antonio, Texas, with offices in Washington, D.C., and Sacramento, California. The group is the only national association representing existing and emerging Hispanic-serving institutions. More information is available at www.hacu.net (opens new window).

Agency Again Receives High Marks in Annual Federal Employee Survey

ALEXANDRIA, Va. (Oct. 26, 2016) – The National Credit Union Administration reached its highest score ever for overall employee satisfaction in the 2016 Federal Employee Viewpoint Survey.

NCUA scored 73 percent in the survey’s Global Satisfaction Index, making it one of the federal government’s best-performing agencies in terms of overall employee satisfaction. The high score reflects NCUA’s efforts to improve employees’ engagement with their jobs, the agency and its mission.

NCUA Board Chairman Rick Metsger said the 2016 survey results reflect the agency’s ongoing efforts to be an employer of choice and a model workplace, providing an environment that offers respect for individuals and opportunities for professional development.

“Knowing NCUA’s employees look forward to coming to work every day is a source of great personal satisfaction for me,” Metsger said. “We have more than 1,200 hard-working, dedicated professionals who regularly will go the extra mile, will look for ways to be more productive and who consider their work important. NCUA is committed to continuing to foster an atmosphere in which our people feel trusted, respected and motivated.”

The Global Satisfaction Index measures four areas of employee satisfaction: jobs, pay, organization and whether employees would recommend their agency as a good place to work. The overall federal government score for global satisfaction was 61 percent. NCUA ranked sixth in that category among 37 federal departments and large agencies with at least 800 employees.

Other significant findings in the 2016 survey of NCUA employees include:

• 96 percent of respondents said they are willing to put in extra work to get a job done;
• 93 percent said they constantly look for ways to do their jobs better;
• 92 percent said their work is important; and
• 88 percent said they are held accountable for achieving results.

NCUA was recognized as one of the top three agencies in its peer group in practicing fairness and empowering employees. The agency also received high marks for promoting balance between employees’ work and personal lives.

NCUA scored 73 percent in the Employee Engagement Index, which measures employees’ commitment to their organization and its mission. That was 8 points higher than the overall government score. A higher score indicates that an agency’s workforce is more innovative, productive, committed and satisfied.

The agency scored 67 percent on the report’s New IQ Index, which measures employees’ views on workplace inclusion, cooperation, and empowerment. That was 9 points above the overall score for the federal government.

More than 400,000 federal employees took part in this year’s survey, and the results report is available on the Office of Personnel Management’s website (opens new window).

NCUA is often recognized for promoting a high-quality work environment and satisfaction among its employees, including the Partnership for Public Service’s annual Best Places to Work in the Federal Government report.

Board Action Bulletin

Board Proposes Further Community Charter Options for Federal Credit Unions

ALEXANDRIA, Va. (Oct. 27, 2016) – The National Credit Union Administration Board held its ninth open meeting of 2016 at the agency’s headquarters here today and unanimously approved five items:

• A final rule modernizing existing field-of-membership definitions for federal credit unions to improve consumer access to affordable credit.
• A proposed rule to provide further field-of-membership community charter options for federal credit unions.
• A final rule re-naming NCUA’s consumer office as the Office of Consumer Financial Protection and Access to clarify its function and role in promoting consumer access to affordable financial services.
• A final rule adjusting civil monetary penalties for inflation, as required by Congress.
• An interagency proposed rule to implement the private flood insurance requirements for loans in special flood hazard areas contained in a 2012 statute.

The Office of Examination and Insurance also briefed the Board on issues relating to credit unions using supplemental capital for risk-based capital calculations.

Field-of-Membership Rule Provides Greater Flexibility and Consumer Choice

More Americans will become eligible for credit union products and services under a final rule (Part 701) approved by the Board to modernize NCUA’s field-of-membership regulations.

“This comprehensive rule expands consumer access to credit and provides them a safe place to invest their life savings,” NCUA Board Chairman Rick Metsger said. “Congress passed the Federal Credit Union Act and the Credit Union Membership Access Act to improve access for consumers to a national system of not-for-profit cooperative credit. But, the world has changed since we last put in place rules to implement these laws. We cannot anchor our regulations to the past; we have to keep pace with how consumers access financial services today.”

In recent years, several states have updated their field-of-membership rules for state-chartered credit unions. Within the requirements of federal law, NCUA Board Member J. Mark McWatters said that the final rule would similarly enhance consumer access to credit by sensibly and reasonably updating NCUA’s rules.

“Our field-of-membership final rule is consistent with both the letter and spirit of the law,” McWatters said. “During our deliberations, I carefully examined the Federal Credit Union Act and the requirements of the Administrative Procedure Act. Based on more than 30 years of legal experience working with issues of complex statutory interpretation, I am confident that the final rule we’ve approved today follows the law. More importantly, these changes will expand access to affordable financial services for consumers, including those in underserved communities.”

Consistent with the limitations of the Federal Credit Union Act, the final rule updates key definitions and makes more than a dozen changes to NCUA’s chartering and field-of-membership rule for federal credit unions by:

• Allowing greater flexibility to community charter credit unions in how they define the local communities they serve;
• Providing credit unions with better opportunities to serve underserved areas by updating the process for defining those areas;
• Enhancing access to credit union services for residents of rural areas by allowing rural district credit unions to serve up to 1 million people;
• Streamlining paperwork for multiple common-bond credit unions that seek to serve additional groups, such as including independent contractors with a strong dependency relationship with an employee group; and
• Expanding credit union access for honorably discharged members of the armed services by allowing them to join credit unions serving their active-duty counterparts.

The final rule also modifies the type and extent of information that a federal credit union must submit to support an application to expand its field of membership.

The final rule, available online here (opens new window), will become effective 60 days after publication in the Federal Register. A comparison chart, available online here (opens new window), summarizes changes made to the previous rule.

Proposed Field-of-Membership Rule Responds to Stakeholder Suggestions

The NCUA Board approved a proposed rule (Part 701) that would make additional changes to the agency’s field-of-membership rule for federal credit unions.

The proposed rule responds to stakeholder suggestions received during the initial field-of-membership rulemaking, but which could not be incorporated because of the Administrative Procedure Act. Specifically, the proposed rule would:

• Raise the current population cap for a “well-defined local community” from 2.5 million people to 10 million;
• Allow the use of a narrative approach to create a new well-defined local community; and
• Correct an error in the final rule that inadvertently restricts fields of membership inside core-based statistical areas to not more than 2.5 million people in a metropolitan division, rather than the core-based statistical area.

The proposed rule also asks questions about possible alternative approaches to field-of-membership issues and gives stakeholders an opportunity to comment.

Comments on the proposed rule, available online here (opens new window), must be received within 30 days of publication in the Federal Register.

Name Change Better Reflects Consumer Office’s Role

The NCUA Board approved a final rule (Parts 708 and 790) to change the name of the Office of Consumer Protection to better reflect its role in facilitating consumer access to credit unions.

The office now will be known as the Office of Consumer Financial Protection and Access. Adding the word “financial” to the office’s title clarifies that the focus is on consumer financial protection, rather than other consumer issues. Adding “access” to the title highlights the office’s duties in the areas of chartering and field of membership.

Providing greater clarity in the office’s title about its consumer financial protection and access to financial services mission will benefit consumers, their communities and credit unions.

The final rule, available online here (opens new window), will be effective upon publication in the Federal Register.

Final Rule Adopts Inflation Adjustments to Civil Monetary Penalties

The NCUA Board approved a final rule (Part 747) to amend its regulations and adjust the maximum amount of civil monetary penalties under its jurisdiction to account for inflation.

At its June open meeting, the Board approved an interim final rule making the adjustments. The final rule adopts those changes, which were required by the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015.

NCUA last adjusted civil monetary penalties in September 2015. Previously, these inflation adjustments were made every four years. In November 2015, Congress enacted legislation requiring annual adjustments and providing for a one-time “catch-up” adjustment for 2016. Beginning in 2017, agencies must publish their inflation adjustment rules in the Federal Register by Jan. 15 of each year.

Although the law requires NCUA to adjust the maximum levels for civil monetary penalties, NCUA is not required to assess the maximum level and retains discretion to assess at lower levels, as it has done historically. For example, the civil monetary penalties NCUA assesses for late filers are modest; the median penalty was $274 for the first quarter of 2016. The Federal Credit Union Act requires NCUA to send any funds received through civil monetary penalties to the U.S. Treasury.

The final rule, available online here (opens new window), adopts the changes made in the interim rule, which became effective July 21, 2016.

Proposed Rule Would Amend Flood Insurance Regulations

The NCUA Board approved an interagency proposed rule (Part 760) that would implement statutory requirements for private flood insurance.

The proposed rule would require regulated lending institutions, such as credit unions, to accept flood insurance policies that meet the statutory definition of “private flood insurance” in the Biggert-Waters Flood Insurance Reform Act of 2012. It also would permit those lenders to accept private flood insurance policies that do not meet that definition on a discretionary basis, subject to certain restrictions.

NCUA is issuing the proposed rule along with the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Farm Credit Administration.

Comments on the proposed rule, available online here (opens new window), must be received within 60 days of publication in the Federal Register.

Supplemental Capital Needs Careful Consideration

The inclusion of supplemental capital as part of the calculations for the risk-based capital rule raises legal and regulatory questions for federally insured credit unions, experts with the Office of Examination and Insurance told the NCUA Board in a briefing.

The Board approved a risk-based capital final rule (opens new window) at its October 2015 open meeting, but deferred action on the issue of supplemental capital. Agency staff have since explored the concept of supplemental capital, including researching studies on its use, reviewing applicable securities and tax laws, and holding discussions with industry experts and credit unions interested in using it.

Staff raised several important questions that must be answered before allowing credit unions to use supplemental capital in the risk-based capital regime, including:

• Who—individual or institutional investors—would be allowed to purchase these securities;
• What tax laws and securities laws—such as anti-fraud laws—would apply; and
• What disclosure standards would apply.

Further regulation, staff said, would be necessary to allow for supplemental capital activities to be conducted in a safe and sound manner and to protect the National Credit Union Share Insurance Fund, such as the permanency of the capital, its capacity to absorb losses and the flexibility of payments. Rulemaking could also include streamlining some existing regulations.

NCUA’s Board is expected to issue an advance notice of proposed rulemaking on supplemental capital in early 2017. The notice will collect stakeholder comments and recommendations on the use of supplemental capital by credit unions.

NCUA tweets all open Board meetings live. Follow

@TheNCUA (opens new window) on Twitter, and access Board Action Memorandums and NCUA rule changes at

www.ncua.gov. NCUA also live streams, archives and posts

videos of open Board meetings online.

WASHINGTON—Five federal regulatory agencies are requesting comment on a joint notice of proposed rulemaking to implement provisions of the Biggert-Waters Flood Insurance Reform Act (Biggert-Waters Act) that require regulated lending institutions to accept certain private flood insurance policies in addition to policies made available by the Federal Emergency Management Agency.

The federal flood insurance statutes require regulated lending institutions to ensure that flood insurance is purchased in connection with loans secured by improved real property located in areas having special flood hazards. Under the Biggert-Waters Act, regulated lenders must accept, in satisfaction of this mandatory purchase requirement, policies issued by private insurers that satisfy the criteria specified in the Biggert-Waters Act.

The proposed rule includes provisions to assist lending institutions in identifying private flood insurance policies that they would be required to accept. The proposal also would clarify that lenders retain their discretion to accept private flood insurance policies that do not meet the criteria for mandatory acceptance, provided certain conditions are met.

Furthermore, the proposed rule would establish criteria to apply in determining that coverage offered by a mutual aid society provides the type of policy or coverage that qualifies as “flood insurance” for purposes of the federal flood insurance laws.

The agencies previously issued a proposal addressing private flood insurance (78 FR 65107). Based on comments received in response to that proposal, the agencies have decided to issue this second proposal for additional public comment.

The proposal is being issued by the Board of Governors of the Federal Reserve System, the Farm Credit Administration, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency.

Comments are due 60 days from date of publication in the Federal Register.

# # #

Attachment: Federal Register notice (opens new window)

Media Contacts:

ALEXANDRIA, Va. (Nov. 1, 2016) – Credit unions that qualify for consulting assistance from the National Credit Union Administration have until Wednesday, Nov. 30, to submit their nominations.

“NCUA’s program is a wonderful opportunity for credit union management to obtain one-on-one guidance from seasoned consultants,” said JeanMarie Komyathy, Acting Director of NCUA’s Office of Small Credit Union Initiatives. “The customized help is provided at no charge and offers credit unions a chance to explore different avenues for growing operations and expanding member services.”

Eligible credit unions should complete the agency’s online application form [link no longer available]. Credit unions may nominate themselves or be nominated by an examiner from NCUA or a state supervisory agency. Credit unions can choose their top three service requests from a drop-down menu included in the application form. Each credit union chosen to participate will be assigned an economic development specialist.

To qualify for NCUA’s consulting assistance, a credit union must fall into one of the following categories:

• Have total assets of less than $100 million;
• Have been chartered for fewer than 10 years;
• Be designated as a Minority Depository Institution; or
• Have a low-income designation from NCUA.

The 2017 consulting period runs from Jan. 1 through June 30. Credit unions selected for the consulting round will be announced in late December. Credit unions not chosen may apply again in subsequent rounds.

NCUA’s Office of Small Credit Union Initiatives fosters credit union development and the effective delivery of financial services for small credit unions, new credit unions, minority depository institutions and credit unions with a low-income designation.

ALEXANDRIA, Va. (Nov. 2, 2016) – Nomura Asset Acceptance Corporation and Nomura Home Equity Loan, Inc. jointly have agreed to pay more than $3 million to settle claims by the National Credit Union Administration alleging the sale of faulty residential mortgage-backed securities to two corporate credit unions, NCUA announced today.

“Every recovery NCUA makes through our legal efforts reduces the possibility of further costs of the corporate resolution being shouldered by credit unions,” NCUA Board Chairman Rick Metsger said. “Our legal team continues to work to fulfill the agency’s statutory responsibilities to protect the credit union system and to pursue recoveries against financial firms we maintain contributed to the corporate crisis.”

The settlement covers claims the NCUA Board asserted in 2011 as liquidating agent for Western Corporate Federal Credit Union and U.S. Central Federal Credit Union. NCUA filed suit in federal district courts in California and Kansas against the Nomura entities. With this settlement, NCUA will dismiss pending suits against both firms. Neither firm admits fault as part of the settlement agreement.

NCUA was the first federal financial institutions regulator to recover losses from investments in securities on behalf of financial institutions that failed in the wake of the recent financial crisis. The Federal Credit Union Act and NCUA regulations require that net proceeds from recoveries be used to pay claims against five failed corporate credit unions, including those of the Temporary Corporate Credit Union Stabilization Fund. Payments to the Stabilization Fund have permitted NCUA’s repayment of outstanding U.S. Treasury borrowings and decreased the amount credit unions pay for the costs of the corporate credit union resolution.

NCUA still has litigation pending against other financial institutions, including Credit Suisse and UBS Securities, alleging they sold faulty residential mortgage-backed securities to corporate credit unions. NCUA also has pending litigation against various residential mortgage-backed securities trustees and LIBOR banks related to corporate credit union losses.

NCUA provides detailed information about recoveries from securities-related litigation on its Legal Recoveries from the Corporate Crisis webpage.

ALEXANDRIA, Va. (Nov. 4, 2016) – Credit unions can get information and advice on negotiating contracts for digital services in a new guidebook from the National Credit Union Administration.

“Knowing how to negotiate a strong contract is essential to running any business,” said JeanMarie Komyathy, Acting Director of NCUA’s Office of Small Credit Union Initiatives. “Credit unions frequently turn to outside companies to provide crucial digital services, including data processing, mobile banking and information technology. If these business relationships aren’t properly managed, a credit union can face potential risks, unanticipated costs and legal expenses. That’s why a good contract is so important, and our new guidebook helps credit unions write those contracts.”

NCUA’s new guidebook covers the elements of the contracting process, including:

NCUA’s Office of Small Credit Union Initiatives fosters credit union development and the effective delivery of financial services for small credit unions, new credit unions, minority depository institutions and credit unions with a low-income designation.

The Federal Financial Institutions Examination Council (FFIEC), today announced the issuance of an updated Uniform Interagency Consumer Compliance Rating System. The revisions reflect the regulatory, examination, technological, and market changes that have occurred since the release of the original rating system. The FFIEC member agencies plan to implement the updated rating system on consumer compliance examinations to begin on or after March 31, 2017.

The Consumer Compliance Rating System is a supervisory policy for evaluating financial institutions’ adherence to consumer compliance requirements. The Uniform Interagency Consumer Compliance Rating System is designed to more fully align the rating system with the FFIEC agencies’ current risk-based, tailored examination approaches. It was not developed with the intention of setting new or higher supervisory expectations for financial institutions. The rating system’s adoption will represent no additional regulatory burden for financial institutions.

The FFIEC members proposed the guidance in May 2016 and invited public comments through July 5, 2016. The agencies received 17 comments through the proposal process. Those comments were taken into account in finalizing the Uniform Interagency Consumer Compliance Rating System. The attached updated rating system will be published shortly in the Federal Register.

Attachment (opens new window)

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