NCUA Board Briefed on Emerging Cybersecurity Threats, PCA Relief Measures

Board Action Bulletin

ALEXANDRIA, Va. (April 22, 2021) – Through a live audio webcast, the National Credit Union Administration Board held its fourth open meeting of 2021 and was briefed on two matters:

  • Current cybersecurity events and trends affecting federally insured credit unions and the broader financial system.
  • An interim final rule that temporarily modifies two areas of NCUA’s prompt corrective action regulations.

Board Briefed on Evolving Cyberthreats to the Financial System

The COVID-19 pandemic has increased cybersecurity vulnerabilities for federally insured credit unions and financial services market participants, which remain a target for hackers and thieves. Top threats include ransomware, malware and phishing attacks, identity theft, denial of service, ATM skimming, pandemic-themed attacks, and supply chain attacks.

As stressed in the briefing provided to the Board by the Chairman’s Special Advisor for Cybersecurity, supply chain risk is a significant threat to financial services because of the layered dependencies that exist in a complex, multi-service provider environment found in the financial services sector.

The NCUA continues to encourage credit union boards of directors to use previously issued advisories to review their relationships, assess and mitigate risk as it relates to their specific supply chain, and continue to strengthen their institution’s cyber vigilance and preparedness efforts.

“Like my fellow Board Members, I am deeply concerned about the risk cyberattacks pose to our financial system,” Chairman Todd M. Harper said. “Briefings like this today are a critical part of our efforts to promote cybersecurity best practices and inform credit unions about the potential threats they face. I encourage credit unions to utilize the information-sharing groups and other resources presented in this briefing.”

Chairman Harper encouraged eligible low-income credit unions to apply for up to $7,000 in funding to strengthen their cyber defenses as part of this years’ Community Development Revolving Loan Fund grant initiative. The application period runs May 3 through June 26, and additional information about this initiative is available on the NCUA website.

Cyber information for credit unions, including regulations and guidance, along with information about protecting themselves and their members from cyber threats is available on the NCUA’s cybersecurity resources webpage.

Interim Final Rule Renews Prompt Corrective Action Relief

The NCUA Board received a briefing by the Office of Examination and Insurance staff on an interim final rule that temporarily modifies certain regulatory requirements to help ensure federally insured credit unions remain operational and able to provide needed financial services during the COVID-19 pandemic.

Specifically, the interim final rule makes two temporary changes to the NCUA’s prompt corrective action regulations. The first change temporarily reduces the earnings retention requirement for federally insured credit unions classified as adequately capitalized. The second change temporarily permits an undercapitalized credit union to submit a streamlined net worth restoration plan if it becomes undercapitalized predominantly because of share growth. If a credit union becomes less than adequately capitalized for reasons other than share growth, it must still submit a net worth restoration plan under the current requirements in NCUA’s regulations.

Due to the pandemic’s continued financial and economic disruptions, the Board approved the interim rule by notation vote and announced this action on April 16. This interim final rule is substantively similar to the interim final rule approved by the Board in May 2020.

“Given the ongoing uncertainty associated with the pandemic and continued elevated levels of insured share growth resulting from the third stimulus package, many well-run credit unions with positive earnings could continue to experience falling net worth ratios this year despite being well managed and fundamentally safe and sound,” Chairman Harper said. “As a result of this change, eligible credit unions will be able to focus their limited resources on serving their members’ needs — especially those of modest means and those disproportionately affected by the pandemic — instead of planning for earnings transfers and developing detailed net worth restoration plans.”

These temporary measures will remain in place until March 31, 2022. The interim final rule is effective upon publication in the Federal Register, and there is a 60-day public comment period.

Chairman Harper discussed the health of the National Credit Union Share Insurance Fund, which is also experiencing stress on its equity ratio due to increased insured share growth. The Chairman noted that the NCUA staff is currently reviewing the financial performance data for the industry.

“I appreciate Vice Chairman Hauptman’s and Board Member Hood’s engagement with the NCUA team and my office on this issue,” Chairman Harper said. “We are all striving to ensure that we continue to manage the Share Insurance Fund in a prudent way, which, by law, is one of the Board’s primary statutory responsibilities. That is the right thing to do for credit unions and their members, the agency, and the taxpayers.”

The NCUA tweets all open Board meetings live. Follow @TheNCUA on Twitter, and access Board Action Memorandums and NCUA rule changes at www.ncua.gov. The NCUA also live streams, archives and posts videos of open Board meetings online.

2021 CDRLF Grant Round Opens May 3

$1.5 Million Available; Credit Unions Should Review Eligibility Before Applying

ALEXANDRIA, Va. (April 15, 2021) – Low-income-designated credit unions seeking Community Development Revolving Loan Fund grants in 2021 will be able to apply between May 3 and June 26, the National Credit Union Administration announced today.

“I want to encourage all eligible credit unions to consider applying for a CDRLF grant this year,” NCUA Chairman Todd M. Harper said. “These grants make a tremendous difference to small, low-income and minority credit unions working to provide more and better services to their members and communities or seeking to bolster their own capacity. As these credit unions and their members continue to disproportionately face the challenges of the COVID-19 pandemic, this funding is very important.”

The agency will administer approximately $1.5 million in CDRLF grants to the most-qualified applicants, subject to the availability of funds. Grants will be awarded in three categories:

  • Underserved Outreach (maximum award of $50,000);
  • Minority Depository Institution Mentoring (maximum award of $25,000); and
  • Digital Services and Cybersecurity (maximum award of $7,000).

Grant requirements, application instructions, and other important information are available on the grants program page of NCUA.gov. Credit unions will use the NCUA’s cybergrants portal to submit their applications. Credit unions with other questions about CDRLF grants may contact the NCUA’s Office of Credit Union Resources and Expansion at [email protected].

In addition to being a low-income-designated institution, a credit union must have an active account with the federal government’s System for Award Management, a Data Universal Number System number, and a Commercial and Government Entity number to be eligible for the program. First-time System for Award Management users can register by following the instructions in the Quick Start Guide for New Registrations. Credit unions with an existing SAM registration must recertify and maintain an active status annually. They can recertify or renew their SAM account status by following the instructions in the Quick Start Guide for Renewing Registrations. Credit unions may obtain a Data Universal Number System number by visiting the Dun & Bradstreet website or calling 1.866.705.5711 to register or search for a DUNS number.

NCUA Board Renews Prompt Corrective Action Relief

ALEXANDRIA, Va. (April 16, 2021) – The National Credit Union Administration Board approved, by notation vote, an interim final rule that temporarily modifies certain regulatory requirements to help ensure federally insured credit unions remain operational and able to provide needed financial services during the COVID-19 pandemic.

“The latest round of stimulus spending has further expanded credit unions’ balance sheets. As a result, many well-run credit unions with positive earnings now have lower net worth ratios,” Chairman Todd M. Harper said. “Given the continued uncertainty with the pandemic and share growth many credit unions are seeing, this targeted, tailored and temporary rule will provide critical relief so eligible credit unions can focus their limited resources on their members’ needs instead of planning for earnings transfers and developing detailed net worth restoration plans.”

This interim rule is substantially similar to an interim final rule the NCUA Board previously approved in May 2020, which expired at the end of that year. Due to the pandemic’s continued financial and economic disruptions, the Board determined it was necessary to reintroduce these two temporary relief measures related to earnings transfer waivers for adequately capitalized credit unions and net worth restoration plans for certain undercapitalized credit unions.

“We get it. We understand what’s happening right now,” said Vice Chairman Kyle S. Hauptman. “As credit unions continue to support their members during this difficult time, many are concerned with the challenges they will face if their net worth ratio drops below the well-capitalized level. While the latest round of stimulus is good news for many Americans, these payments accelerate the trends of unprecedented share growth in the last year. Temporarily providing relief from prompt corrective action requirements will allow credit unions to stay focused on serving members.”

“Because of the pandemic and stimulus, I am concerned that credit unions may temporarily fall below the well-capitalized level and become subject to various prompt corrective action requirements,” Board Member Rodney E. Hood said. “While this temporary relief wasn’t widely utilized last year when it expired, it now appears we need this tool now for credit unions. I thank Chairman Harper for bringing this rule forward to provide relief to credit unions of all sizes that experience a decline in their net worth ratio because of a rapid increase in shares because of the flight to safety.”

Specifically, the interim final rule makes two temporary changes to the NCUA’s prompt corrective action regulations. The first temporarily reduces the earnings retention requirement for federally insured credit unions classified as adequately capitalized.

Those credit unions unable to meet the earnings retention requirement will not have to submit a written application requesting approval to decrease their earnings retention amount. However, if a credit union either poses an undue risk to the National Credit Union Share Insurance Fund or exhibits material safety and soundness concerns, the appropriate NCUA Regional Director may require the credit union to submit an earnings transfer waiver request.

The second change temporarily permits an undercapitalized credit union to submit a streamlined net worth restoration plan if it becomes undercapitalized predominantly because of share growth. If a credit union becomes less than adequately capitalized for reasons other than share growth, it must still submit a net worth restoration plan under the current requirements in NCUA’s regulations.

These temporary measures will remain in place until March 31, 2022. The interim final rule is effective upon publication in the Federal Register, and there is a 60-day public comment period.

NCUA Releases Office of Minority and Women Inclusion Annual Report to Congress

ALEXANDRIA, Va. (April 14, 2021) – Today, the National Credit Union Administration released its Office of Minority and Women Inclusion (OMWI) annual report detailing the agency’s progress in 2020 in advancing diversity, equity, and inclusion in its workforce. The report also highlights the agency’s efforts to ensure fair and inclusive business practices as well as assess the diversity policies and practices of the entities it regulates. The full OMWI 2020 Annual Report to Congress can be found on the NCUA website.

“This report reflects the agency’s ongoing commitment to promote diversity, equity, and inclusion as values reflected in our policies and practices,” Chairman Todd M. Harper said. “The NCUA remains deeply dedicated to advancing diversity, equity, and inclusion in its workforce, business activities, and the credit union system, and creating a greater sense of belonging within the agency for all employees.”

Among the accomplishments highlighted in the report:

  • 41.5 percent of new hires in 2020 were people of color. Also, gender diversity among the agency’s senior executives achieved parity for the first time.
  • 15.4 percent and 4.2 percent of the NCUA’s workforce self-identify as having disabilities and targeted disabilities, respectively. These figures exceed the federal employment goals established in Section 501 of the Rehabilitation Act of 1973.
  • 23.4 percent of the NCUA’s workforce participated in employee resource groups, more than twice the benchmark participation rate for successful programs like these.
  • 188 federally insured credit unions submitted Voluntary Credit Union Diversity Self-Assessments in 2020, up 59.3 percent from 118 submissions in 2019.
  • 33.2 percent of the NCUA’s total reportable contracting dollars for the year were awarded to minority- and women-owned businesses.
  • 15 facilitated, open discussions on racial injustice and racism were hosted by OMWI in the aftermath of the killing of George Floyd and the nationwide Black Lives Matter demonstrations, and for nearly all special emphasis programs observances, OMWI hosted an event featuring a guest speaker who provided a range of experiences and insights into how to be more intentionally inclusive in the workplace.

“Unquestionably, 2020 was one of the most challenging years in recent history,” Harper said. “Despite the unexpected changes the COVID-19 pandemic caused to the agency’s operations, OMWI skillfully ensured that the NCUA continued to adhere to its mission and values.”

NCUA’s Office of Minority and Women Inclusion oversees all agency matters relating to measuring, monitoring, and establishing policies for diversity in NCUA’s management, employment, and business activities. It also assesses the diversity policies and practices of NCUA’s regulated entities, excluding the enforcement of statutes, regulations, and executive orders pertaining to civil rights.

Samuel Schumach Named Deputy Director for External Affairs and Communications

ALEXANDRIA, Va. (April 12, 2021) – National Credit Union Administration Chairman Todd M. Harper announced today he has appointed Samuel Schumach to serve as Deputy Director for External Affairs and Communications.

“Sam brings a wealth of strategic communications and congressional relations experience to this position,” Chairman Harper said. “His deep set of public affairs skills, along with his knowledge of the legislative process and proven leadership abilities, will serve the NCUA well as we continue to respond to the economic fallout caused by the COVID-19 pandemic, strengthen our commitment to consumer financial protection and economic equity, address cybersecurity risks, and position the agency for the future.”

Schumach joins the NCUA from the Federal Aviation Administration, where he served as a legislative affairs officer, responsible for managing legislative affairs and communications for the Office of Commercial Space Transportation.

Prior to his FAA experience, Schumach was a media spokesperson for the Consumer Financial Protection Bureau and served as the press secretary for the United States Office of Personnel Management, The White House Office of National Drug Control Policy, and for former U.S. Senate Majority Leader Harry Reid. His private sector experience includes strategic communication and congressional relations consulting at Deloitte Consulting, LLP. He also served for nearly a decade as an enlisted member in the active and reserve components of the United States Air Force.

“I am thrilled to join the dedicated team at NCUA at such a pivotal time for the credit union industry,” said Schumach. “Credit unions have been a part of my financial life since the day I opened my first account, and I know first-hand how vital they are to communities across the country. I look forward to working alongside Chairman Harper and the Board to promote a safe, sound, and equitable credit union industry.”

Schumach earned a master’s degree in global security studies from The Johns Hopkins University and a bachelor’s degree in political science from the University of Nevada, Las Vegas. He is a partner in the Truman National Security Project, an associate member of the Hispanic Bar Association of D.C., a member of the National Press Club, and he holds a private pilot license.

Agencies Issue Statement and Request for Information on Bank Secrecy Act/Anti-Money Laundering Compliance

(April 9, 2021) – The federal banking agencies, in consultation with the Financial Crimes Enforcement Network and the National Credit Union Administration, today issued a joint statement addressing how risk management principles described in the “Supervisory Guidance on Model Risk Management” relate to systems or models used by banks to assist in complying with the requirements of Bank Secrecy Act (BSA) laws and regulations. The statement further notes that it does not alter existing BSA/anti-money laundering (AML) legal or regulatory requirements or establish new supervisory expectations, and that no specific model risk management framework is required.

The agencies, along with the National Credit Union Administration and the Financial Crimes Enforcement Network, also announced a request for information (RFI) on the extent to which the principles discussed in the guidance support compliance by banks and credit unions with BSA/AML and Office of Foreign Assets Control requirements. The agencies are seeking comments and information to better understand bank practices and determine whether additional explanation or clarification may be helpful.

Comments to the RFI will be accepted for 60 days following publication in the Federal Register.

Attachments

Joint Statement
Request for Information

Agency Contact Phone
Federal Reserve Darren Gersh 202.452.2955
FDIC Brian Sullivan 202.412.1436
FinCEN Candice Basso 703.905.3770
NCUA Joseph Adamoli 571.645.6636
OCC Stephanie Collins 202.649.6870

Indianapolis’ Newspaper Federal Credit Union Closes, Most Shares Assumed by Elements Financial

Member Deposits Remain Protected up to $250,000 by the Share Insurance Fund

ALEXANDRIA, Va. (March 31, 2021) – The National Credit Union Administration today liquidated Indianapolis’ Newspaper Federal Credit Union of Indianapolis, Indiana.

Elements Financial Federal Credit Union of Indianapolis, Indiana, immediately assumed most of Indianapolis’ Newspaper Federal Credit Union’s shares. Elements Financial Federal Credit Union is a federally insured and chartered credit union with 116,004 members and assets of more than $2 billion, according to the credit union’s most recent Call Report.

Elements Financial Federal Credit Union expects no interruption in services for the new members, and their accounts remain federally insured by the National Credit Union Share Insurance Fund. Administered by NCUA, the Share Insurance Fund insures individual accounts up to $250,000, and insures a member’s interest in all joint accounts combined up to $250,000. The Share Insurance Fund also separately protects IRA and KEOGH retirement accounts up to $250,000. The Share Insurance Fund has the backing of the full faith and credit of the United States.

Members with questions about their accounts may contact Elements Financial Federal Credit Union at 317.524.5025, Monday through Friday from 8 a.m. to 4:30 p.m., or through their website.

The NCUA has retained a portion of Indianapolis’ Newspaper Federal Credit Union’s shares. Members should contact NCUA’s Asset Management and Assistance Center to see if their shares have been retained:

Indianapolis’ Newspaper Federal Credit Union
c/o National Credit Union Administration
4807 Spicewood Springs Road, Suite 5100
Austin, Texas 78759
512.231.7940
[email protected]

The NCUA will also retain all the Indianapolis’ Newspaper Federal Credit Union’s loans and will use Statebridge Company to perform loan servicing. Members with questions pertaining to their loan account can contact Malaya Lawrence at 866.466.3360, extension 6357 or by email at [email protected]. Members will also submit loan payments to Statebridge Company:

Statebridge Company, LLC
Attn:  Payment Processing Dept
P.O. BOX 173313
Denver, CO 80217-3313

The NCUA made the decision to liquidate Indianapolis’ Newspaper Federal Credit Union and discontinue its operations after determining the credit union was insolvent and has no prospect for restoring viable operations on its own.

At the time of liquidation and subsequent assumption by Elements Financial Federal Credit Union, Indianapolis’ Newspaper Federal Credit Union served 1,143 members and had assets of approximately $6.4 million, according to the credit union’s most recent Call Report. Chartered in 1961, Indianapolis’ Newspaper Federal Credit Union primarily served current and past employees of the Indianapolis Star and a few other select employee groups in Indianapolis, Indiana.

Indianapolis’ Newspaper Federal Credit Union is the first federally insured credit union liquidation in 2021.

Creditor Claim Form

Marshall Appointed to FFIEC State Liaison Committee, Allard and Pleger Re-Appointed

(April 1, 2021) – The Federal Financial Institutions Examination Council (FFIEC) today announced the appointment of Susannah Marshall to the FFIEC’s State Liaison Committee (SLC). Marshall was designated by the Conference of State Bank Supervisors (CSBS) to serve on the SLC for a two-year term that begins today and continues through March 31, 2023.

Marshall has served as Commissioner of the Arkansas Bank Department since October 1, 2020. Marshall began her Bank Department career as Commercial Bank Examiner in 1995, and in 2003 was promoted to Financial Analyst. In 2005, Marshall was promoted to Financial Analyst Supervisor, and was appointed as Deputy Bank Commissioner in 2007. Marshall served as Deputy Bank Commissioner until her 2020 appointment to Bank Commissioner.

As Bank Commissioner, Marshall is responsible for the regulation, supervision and examination of Arkansas state-chartered banks, bank holding companies, a trust company, and a state-chartered non-profit organization. As of December 31, 2020, the agency supervised 75 state chartered commercial banks with total assets over $126.6 billion.

Marshall has previously served on the Board of Directors for the CSBS and currently serves on various committees within the organization, including Vice-Chairman of a multi-state, regional regulatory committee and a national committee of state and federal regulators.

Marshall earned a bachelor’s degree in Accounting from Arkansas State University, Jonesboro, Arkansas, in 1995 and is a 2002 graduate of the Southwestern Graduate School of Banking, Dallas, Texas. During her tenure with the Bank Department, Marshall obtained the designations of Commissioned Senior Examiner and Certified Examination Manager.

The FFIEC also announced that the American Council of State Savings Supervisors (ACSSS) has reappointed Superintendent Kevin Allard, Ohio Division of Financial Institutions, to the SLC for a first full two-year term; and the National Association of State Credit Union Supervisors (NASCUS) has reappointed Senior Deputy Commissioner Stephen Pleger, Georgia Department of Banking and Finance, for a second two-year term to the SLC. Allard and Pleger’s two-year terms will expire on March 31, 2023.

The SLC is comprised of five members, and also includes:

  • Tom Fite, Director, Indiana Department of Financial Institutions, selected by the Council; and
  • Melanie Hall, Commissioner, Montana Division of Banking and Financial Institutions, selected by the Council.

The FFIEC was created by the federal Financial Institutions Regulatory and Interest Rate Control Act of 1978 to “prescribe uniform principles and standards for the federal examination of financial institutions” and “make recommendations to promote uniformity” in the supervision of financial institutions. It also conducts schools for examiners employed by the five federal member agencies represented on the FFIEC and makes those schools available to employees of state agencies that supervise financial institutions.

The FFIEC consists of the following six voting members: a member of the Board of Governors of the Federal Reserve System; the Chairman of the Federal Deposit Insurance Corporation; the Director of the Consumer Financial Protection Bureau; the Comptroller of the Currency; the Chairman of the National Credit Union Administration; and the Chairman of the SLC.

The SLC consists of five representatives of state banking and credit union agencies that supervise financial institutions. Members are designated by the CSBS, ACSSS, NASCUS, and the FFIEC. An SLC member may have his or her two-year term extended by the appointing organization for an additional, two-year term.

Agency Contact Phone
NCUA Joseph Adamoli 703.518.6330
SLC Catherine Pickles 202.728.5734

Todd M. Harper Named FFIEC Chairman

(April 1, 2021) – Todd M. Harper, Chairman, National Credit Union Administration (NCUA), has been named Chairman of the Federal Financial Institutions Examination Council (FFIEC). His two-year term runs from April 1, 2021, through March 31, 2023. The Council also named Blake Paulson, Acting Comptroller of the Currency, Office of the Comptroller of the Currency (OCC), as its new vice chairman for the same two-year term.

“I am honored to serve as the next Chairman of the FFIEC and will work to foster communication, cooperation, and coordination within the Council to advance greater uniformity and best practices in supervision,” said Mr. Harper. “I want to thank past Chairmen Kathleen Kraninger and David Uejio for their service to the FFIEC. Going forward, our work will focus on the COVID-19 economic fallout, safety and soundness, consumer financial protection, economic equity and justice, cybersecurity, appraisals, and stakeholder collaboration.”

Mr. Harper became the NCUA’s twelfth Chairman on January 20, 2021. He previously served as an NCUA Board member, director of the agency’s then-Office of Public and Congressional Affairs, and chief policy advisor to former Chairmen Debbie Matz and Rick Metsger, advising both on FFIEC matters. Prior to his tenure at the NCUA, Mr. Harper worked for the U.S. House of Representatives as staff director for the Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises.

Mr. Harper holds an undergraduate degree in business analysis from Indiana University’s Kelley School of Business and a graduate degree in public policy from Harvard University’s Kennedy School of Government.

The FFIEC was established in March 1979 to prescribe uniform principles, standards, and report forms and to promote uniformity in the supervision of financial institutions. It also conducts schools for examiners employed by the five federal member agencies represented on the FFIEC and makes those schools available to employees of state agencies that supervise financial institutions. The Council consists of the following six voting members: a member of the Board of Governors of the Federal Reserve System; the Chairman of the Federal Deposit Insurance Corporation; the Director of the Consumer Financial Protection Bureau; the Comptroller of the Currency; the Chairman of the National Credit Union Administration; and the Chairman of the State Liaison Committee.

Agency Contact Phone
Federal Reserve Darren Gersh 202.452.2955
CFPB Michael Robinson 202.435.7170
FDIC Julianne Breitbeil 202.898.6895
NCUA Joseph Adamoli 703.518.6330
OCC Stephanie Collins 202.649.6870
SLC Catherine Pickels 202.728.5734

Agencies Seek Wide Range of Views on Financial Institutions’ Use of Artificial Intelligence

WASHINGTON (March 29, 2021) – Five federal financial regulatory agencies are gathering insight on financial institutions’ use of artificial intelligence (AI). The agencies seek information from the public on how financial institutions use AI in their activities, including fraud prevention, personalization of customer services, credit underwriting, and other operations.  

The Federal Reserve Board, the Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA) and the Office of the Comptroller of the Currency (OCC) announced the request for information (RFI) to gain input from financial institutions, trade associations, consumer groups, and other stakeholders on the growing use of AI by financial institutions. More specifically, the RFI seeks comments to better understand the use of AI, including machine learning, by financial institutions; appropriate governance, risk management, and controls over AI; challenges in developing, adopting, and managing AI; and whether any clarification would be helpful.  

Comments will be accepted for 60 days following publication in the Federal Register.

Attachment: Request for Information and Comment on Financial Institutions’ Use of Artificial Intelligence, including Machine Learning

Agency Contact Phone
Federal Reserve Board Darren Gersh 202.452.2955
CFPB Michael Robinson 202.435.7170
FDIC Julianne Breitbeil 202.898.6895
NCUA Ben Hardaway 703.518.6333
OCC Bryan Hubbard 202.649.6870