By Ancin Cooley
We live in odd times.
CEOs, I know you’ve had frustrating encounters with auditors and regulators. They can feel burdensome, even annoying. But this latest move from the National Credit Union Administration (NCUA) isn’t a win for the reduction of “regulatory burden”—it’s something far more concerning.
Although the headlines highlight the elimination of reputation risk, please read further. In addition to eliminating reputation risk as a rating, NCUA has discontinued assigning ratings to all seven risk categories:
- Credit
- Interest Rate
- Liquidity
- Transaction
- Compliance
- Reputation
- Strategic
Imagine someone removing all the smoke detectors from your building and telling you, “Don’t worry, we’ll let you know when we see fire.”
Not About Busywork
The purpose of these risk ratings was never busywork. At the aggregate level, they provided field offices, regions, and national leadership with a top-down view of where risk was accumulating. From a staffing standpoint, if a credit union’s liquidity risk was rated high, it signaled the need for additional expertise at the next examination.
Examiners and ERM professionals assess each category based on quantity, direction, and the quality of risk management. The point was never to penalize higher-risk profiles. It was to ensure that if you accepted a higher risk, your management practices were robust enough to handle it.
How is this a win for the members and the safety and soundness of credit unions? Why do we only hear about tax status, and none of these moves requested are discussed with the same intensity?
A couple of notes:
NCUA Credit Risk Webinar
On July 15, 2025, in an NCUA credit risk webinar, an examiner (Min 13:49) discussed the benefits of key concepts like risk appetite, risk tolerance, and risk capacity.
Those are excellent tools for boards and executives. They’re the backbone of modern ERM. But here’s the contradiction: NCUA is now saying those concepts are helpful for credit unions to adopt, while simultaneously discontinuing examiner use of risk ratings for the seven categories (credit, liquidity, interest rate, compliance, transaction, reputation, and strategic).
Additional Actions Needed to Strengthen Oversight
On Sept. 23, 2021, the Government Accountability Office issued a report stating NCUA has opportunities to improve its use of supervisory information to address deteriorating credit unions. By more fully leveraging the additional predictive value of the CAMEL component ratings, NCUA could take earlier, targeted supervisory action to help address credit union risks and mitigate losses to the NCUSIF. As of today, one of the recommendations is still open, and another is partially addressed. Here’s the site where you can read more.
For additional resources information, go here and here.
Ancin Cooley leads CUCommunities.org, a new subscription-based online learning and mentoring platform for credit union professionals and volunteers.
