Examiners will review a credit union's IRR program for the following key risk management and control activities:

• Key assumptions and related data sets are reasonable and well documented.
• The credit union's overall level of IRR exposure is properly measured and controlled.
• Results are communicated to decision-makers and the board of directors.
• Proactive action is taken to remain within safe and sound policy limits.

Liquidity Risk

According to Harper's letter, examiners will review a credit union's liquidity policies, procedures and risk limits. Examiners will evaluate liquidity management in the following ways:

• The potential effects of changing interest rates on the market value of assets and borrowing capacity.
• Scenario analysis for liquidity risk modeling, including possible member share migrations (for example, shifts from core deposits into more rate-sensitive accounts).
• Scenario analysis for changes in cash flow projections for an appropriate range of relevant factors (for example, changing prepayment speeds).
• The appropriateness of contingency funding plans to address any plausible unexpected liquidity shortfalls.

Credit Risk

Due to high inflation and rising interest rates, NCUA examiners will evaluate the "soundness of existing lending programs, any adjustments your credit union made to loan underwriting standards and portfolio monitoring practices, and loan workout strategies for borrowers facing financial hardships."

The letter added, "NCUA examiners will carefully consider all factors in evaluating your credit union's efforts to provide relief for borrowers, including whether the efforts were reasonable and conducted with proper controls and management oversight."

Fraud Prevention and Detection

NCUA examiners will continue to review internal fraud controls and separation of duties in 2023.

The agency announced a new management questionnaire this year to help credit unions identify fraud and other potential risk exposures to help protect the Share Insurance Fund.

"The questionnaire will be sent to credit unions in the pre-examination planning stage for all full-scope exams along with the Items Needed List, including on joint exams with State Supervisory Authorities (SSAs)," the letter read. "Credit unions only need to complete one questionnaire per examination. If an SSA uses a similar questionnaire, the federal and state examiners will coordinate to decide which questionnaire the credit union will complete to reduce duplication."

Information Security

Harper's letter emphasized cybersecurity as an examination priority in 2023 and asked credit union leaders to "remain very vigilant" in adapting and responding to cyber threats.

"Examiners will evaluate whether credit unions have established adequate information security programs to protect members and the credit union," the letter stated.

Consumer Financial Protection

Compliance with consumer financial protection laws, as it pertains to federal credit unions, will be another area of focus for NCUA examiners this year. Among the list of items examiners will look at are compliance with the Flood Disaster Protection Act and disclosure requirements "as we continue to evolve our understanding of the impact of climate-related financial risk on credit unions, credit union members and the Share Insurance Fund."

The letter emphasized the following areas examiners will focus on:

• Overdraft programs;
• Fair lending, including review of residential real estate appraisals for any bias;
• The Truth in Lending Act; and
• The Fair Credit Reporting Act.

Harper's letter also emphasized that exam flexibility will continue as examination and supervision will occur onsite and offsite. "Examiners will continue to conduct some examination activity offsite when the activity can be completed efficiently and effectively at credit unions that can accommodate offsite work," the letter read.

READ MORE: NCUA's 2023 Supervisory Priorities letter.