ALEXANDRIA, Va.–A February memorandum reveals that balance sheet management, “redefinining” regulatory and supervisory approaches, and agency realignment following a 23% reduction in staff are among the top management and performance challenges for NCUA in 2026, according to a posting on the agency’s website.
The memorandum was posted among “other reports” from the Office of Inspector General (OIG), and shows five such top challenges in all, according to Regulatory Report, which first reported the memo.
Below is a breakdown of the five challenges highlighted in the report.
Balance Sheet Management
The inspector general said the economic environment—marked by elevated inflation and uncertainty—continues to affect credit union performance and balance sheet stability.
The NCUA has identified balance sheet management as a key supervisory priority for 2026, citing higher funding costs, declining loan performance, liquidity pressures and heightened sensitivity to market risk.
According to the report, interest rate risk remains a particular concern following a period when credit unions expanded their balance sheets during historically low interest rates. Institutions holding large concentrations of long-term, fixed-rate mortgages from that period may face added pressure as rates remain higher.
The inspector general also highlighted the need for strong credit administration and monitoring of loan portfolios as asset quality challenges emerge.
Additionally, the report noted the importance of the NCUA’s Central Liquidity Facility, which provides emergency liquidity to credit unions. While a 2025 audit found increased participation in the facility, the watchdog said the agency should continue monitoring liquidity risks as economic conditions evolve.
Redefining Regulatory and Supervisory Approaches
The report said the NCUA must continue refining its examination and supervision framework to address evolving risks while minimizing unnecessary regulatory burden.
The agency’s risk-focused examination program is designed to improve efficiency and prioritize material threats to the credit union system and the National Credit Union Share Insurance Fund, the report adds.
The inspector general noted that NCUA has proposed eliminating or updating regulations that are outdated, duplicative or overly burdensome, in line with broader federal deregulation efforts, as part of its Deregulation Project.
At the same time, the report says the agency will be tasked with implementing new regulations tied to emerging financial technologies. The report cited upcoming rulemaking to implement provisions of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, which will address financial institutions’ participation in stablecoin markets.
The report also said that recent changes to examination scheduling and reductions in the number of NCUA examiners require careful monitoring to ensure institutions receive adequate oversight when risks increase.
Cybersecurity — Protecting Systems and Data
Cybersecurity threats remain one of the most persistent risks facing the financial sector, the inspector general said.
Credit unions’ growing reliance on complex technology platforms and digital payment systems has increased exposure to cyberattacks, including malware, ransomware and distributed denial-of-service attacks.
Such incidents could threaten the safety and soundness of individual credit unions and potentially lead to losses for the National Credit Union Share Insurance Fund, the report said.
The watchdog recommended that the NCUA continue emphasizing cybersecurity in its examinations and ensure institutions maintain robust information security programs.
The report also highlighted the agency’s Automated Cybersecurity Evaluation Toolbox (ACET), which credit unions can use to assess their cybersecurity preparedness and identify areas for improvement.
In addition to overseeing credit unions’ cyber readiness, the inspector general said NCUA must ensure its own systems are protected from cyber threats that could disrupt agency operations.
Implementation of Artificial Intelligence
Artificial intelligence presents both opportunities and risks for financial institutions and regulators, the inspector general said.
Financial firms increasingly use AI for fraud detection, customer service and credit underwriting, but these technologies may also introduce safety, soundness and consumer compliance risks.
The report cited guidance from the Financial Stability Oversight Council urging regulators to monitor rapid developments in AI, including generative AI, to ensure oversight frameworks keep pace with innovation.
The NCUA has begun exploring AI tools internally. In January 2025, the report notes Chairman Hauptman identified promoting the appropriate use of AI to enhance staff productivity as one of his priorities.
The agency later issued an artificial intelligence compliance plan and a formal policy governing AI use in February 2026 to ensure technologies improve regulatory oversight while maintaining privacy, security and public trust.
The inspector general said the NCUA must also address potential barriers to AI adoption, including workforce expertise, data privacy concerns, vendor transparency and the cost of new technologies.
Agency Realignment
The report also identified internal organizational changes as a key challenge for the NCUA.
The agency has reduced its workforce by roughly 23% through a voluntary separation program and is restructuring operations to align staff and resources with strategic priorities.
According to the inspector general, the NCUA is attempting to streamline policies, refine processes and modernize systems to improve efficiency while continuing to meet its statutory responsibilities.
However, the report said the agency must carefully manage operational risks during the transition, ensuring it maintains the capabilities needed to supervise credit unions effectively and protect the Share Insurance Fund.
The inspector general’s office said ongoing audits will examine enterprise risk management and other internal operations to assess whether the agency remains positioned to carry out its mission.
The report can be found here.
