As we begin 2025, credit unions continue to face a rapidly evolving financial landscape shaped by rising credit risks, liquidity concerns, cybersecurity threats, and ongoing regulatory changes. The National Credit Union Administration (NCUA) has outlined its supervisory priorities for the year ahead, focusing on areas that present the highest risk to credit unions, their members, and the National Credit Union Share Insurance Fund (Share Insurance Fund). For credit unions to successfully navigate these challenges, it’s crucial to consider strategic partnerships that can streamline operations, optimize risk management, and help meet regulatory demands. Partnering with a trusted one-to-many solutions provider offers an effective way to address these priorities while enhancing operational efficiency and member satisfaction.
1. Tackling Credit Risk in a Challenging Environment
Credit risk will remain a key supervisory priority for 2025. Credit unions have already seen signs of stress in their loan portfolios, with delinquencies and charge-offs rising. Particularly concerning is the rapid deterioration of credit card and used vehicle loan performance, with delinquency rates and charge-off levels exceeding even the peaks of the 2008 financial crisis. To succeed in this environment, credit unions must be vigilant in reviewing their lending and risk management practices.
What it takes to succeed:
- Outsource risk management and collections: By collaborating with a solutions provider that specializes in credit risk management, credit unions can implement best-in-class practices for loan underwriting, collections, and workout strategies for members in financial distress.
- Leverage data analytics: A trusted partner can offer advanced data analytics tools to assess credit risk, identify emerging trends, and provide insights into loan portfolio performance.
- Focus on loan modifications: Ensure that your partner can help craft and implement modification strategies that assist borrowers facing difficulties while maintaining controls and oversight.
Outsourcing credit risk management to an experienced partner can help credit unions focus on their core mission while improving overall portfolio health.
2. Managing Balance Sheets and Mitigating Risk to Earnings and Net Worth
Credit unions are exposed to a variety of risks that can affect earnings and net worth, particularly interest rate risk. The recent rise in interest rates has squeezed net interest margins, affecting earnings. While some credit unions have experienced rising costs of funds, loan and investment returns have yet to fully recover. Moving into 2025, the focus should be on maintaining a strong balance sheet and managing liquidity risks to protect both earnings and capital.
What it takes to succeed:
- Leverage advanced balance sheet management tools: Partnering with a solutions provider that offers technology-driven tools for managing liquidity, interest rate risk, and capital planning can help credit unions mitigate potential earnings pressures.
- Outsource liquidity management: A trusted provider can offer strategic liquidity management services, ensuring that your credit union has the right resources available to meet member needs and minimize risk.
- Optimize interest rate risk management: Utilize advanced risk management platforms to assess the impact of changing interest rates on earnings and net worth, allowing for faster adjustments to protect financial stability.
Maintaining a clear focus on these areas will ensure that your credit union remains financially sound and able to weather any turbulence ahead.
3. Bolstering Cybersecurity Defenses
Cybersecurity continues to be a top priority, as the threat landscape grows increasingly complex. Cyberattacks are becoming more frequent and sophisticated, and the risk to credit unions’ sensitive data, systems, and operations is higher than ever. NCUA examiners will assess your credit union’s ability to safeguard both member data and its own systems from potential breaches.
What it takes to succeed:
- Outsource cybersecurity management: Partner with a cybersecurity provider that offers proactive threat detection, real-time monitoring, and robust incident response capabilities to protect your systems and data.
- Utilize automated cybersecurity tools: Leverage automated tools like the NCUA’s Automated Cybersecurity Evaluation Toolbox (ACET) to assess your cybersecurity maturity and identify areas for improvement.
- Enhance third-party risk management: Work with a provider who can help manage third-party cybersecurity risks, ensuring that all vendors are assessed for their security posture and continuously monitored.
By fortifying your cybersecurity strategy, your credit union can reduce the likelihood of a breach and minimize the impact of any potential incidents.
4. Compliance with Consumer Financial Protection Laws
The NCUA will continue its focus on consumer financial protection, ensuring credit unions are compliant with key laws and regulations, such as the Military Lending Act and the Home Mortgage Disclosure Act. In 2025, particular attention will be paid to overdraft programs, fair lending practices, and the accuracy of consumer financial data reporting.
What it takes to succeed:
- Streamline compliance with trusted solutions: Partnering with a solutions provider that specializes in compliance management can help ensure your credit union meets all consumer protection regulations and stays up to date with changing laws.
- Outsource audit and review functions: Utilize external partners to perform regular compliance audits and reviews of overdraft programs, lending practices, and consumer disclosures to ensure you remain compliant and transparent.
- Automate compliance monitoring: Work with a provider that offers automated systems for tracking and managing regulatory compliance, ensuring that any potential issues are addressed proactively.
Maintaining compliance with these regulations will not only protect your credit union from legal risks but also promote a positive, trust-based relationship with your members.
5. Partnering for Success: Your Roadmap to Growth and Stability
As the financial landscape continues to evolve, credit unions must adapt to a range of challenges—rising credit risk, balance sheet management concerns, cybersecurity threats, and regulatory pressures. Strategic partnerships with trusted one-to-many solutions providers can streamline operations, reduce risks, and enhance overall efficiency. By partnering with experts in areas like credit risk management, balance sheet optimization, cybersecurity, and regulatory compliance, credit unions can free up resources to focus on their core mission: providing exceptional service to their members.
What it takes to succeed:
- Build strong, long-term partnerships: Collaborate with a trusted partner who understands the unique needs of your credit union and can provide customized solutions to address your specific challenges.
- Leverage technology and innovation: Embrace digital transformation by partnering with providers that offer cutting-edge technology solutions to enhance operational efficiency, risk management, and member engagement.
- Engage in proactive planning: Develop a comprehensive strategic plan that incorporates partnerships, technology, and risk management to ensure long-term growth and stability.
By forging strong strategic partnerships, credit unions can not only navigate the supervisory priorities outlined by the NCUA but also set themselves up for a successful and resilient 2025.
This content was first featured with CUInsight.