NCUA examiners will look at items such as the level and nature of inherent balance sheet risks, management expertise and adequacy of reserves allocated, when doing examinations of credit unions.
Those are among the points made in the agency's supervisory letter on the subject, released earlier this month.
Examiners have been asked to ensure credit unions have established appropriate risk limits for each product they offer and determine whether managers have assessed the adequacy of net worth based on potential exposure to concentration risks and whether they have considered event risks that could expose them to more risk.
Credit unions will also be evaluated if there is a system in place for reacting when risk limits are reached and whether board members and senior executives receive regular reports on individual and aggregate exposure to concentration risk.
If a credit union has significant loan concentrations, the credit union must analyze origination and portfolio trends by product, loan structure, credit score and other criteria; delinquency and loss distribution trends by products; performance of third parties; and market trends by geographic areas.
To access the letter, go to: www.ncua.gov/news/express/xfiles/10-CU-03-EnclosureConcentrationRiskSupLetter.pdf