8 Expected Risks and Threats Credit Unions Should Monitor in 2024 (2024)

FAQs

8 Expected Risks and Threats Credit Unions Should Monitor in 2024? ›

The general outlook for the economy in 2024 is favorable. However, slowing growth and moderately higher unemployment could cause challenges for credit unions, such as reduced loan demand and higher credit risk. The changing interest rate environment will also affect credit union performance.

The general outlook for the economy in 2024 is favorable. However, slowing growth and moderately higher unemployment could cause challenges for credit unions, such as reduced loan demand and higher credit risk. The changing interest rate environment will also affect credit union performance.

With all that in mind, NCUA's primary areas of supervisory focus for 2024 are: Credit Risk. Liquidity Risk. Consumer Financial Protection.

Information Security (Cybersecurity)

The evolving cybersecurity threat landscape poses persistent risks to credit unions. As credit union technology-related operating environments become ever more complex, it is crucial to establish a cybersecurity program that can adapt and evolve to counter these threats effectively.

Liquidity Risk: The risk of not having sufficient liquid assets to meet the credit union's short-term obligations, which could impact its ability to function effectively and serve its members. Interest Rate Risk: Credit unions often have a significant portion of their assets and liabilities tied to interest rates.

Credit unions facing challenges in managing risks, such as credit risk or cybersecurity threats, may find themselves in difficult situations. Demographic Shifts: Changes in demographics, including aging populations and shifting consumer behaviors, can impact the demand for certain financial products and services.

The Fed has supervisory and regulatory authority over many banking institutions. In this role the Fed 1) promotes the safety and soundness of the banking system; 2) fosters stability in financial markets; and 3) ensures compliance with laws and regulations under its jurisdiction.

A Federal credit union may, to the extent permitted under Section 107(6) of the Act and this section, receive payments on shares, (regular shares, share certificates, and share draft accounts) from public units and political subdivisions thereof (as those terms are defined in § 745.1) and nonmember credit unions, and ...

The NCUA Rules and Regulation Part 748, Appendix B was issued to require programs to respond to unauthorized access to member information.

What are the external threats to credit unions? ›

Operating as non-profit entities presents a threat to credit unions since they need to compete with large commercial banks. Larger financial institutions report billions of dollars in profits every year, allowing them to invest in new locations and infrastructure and even acquire new technologies.

A major existential threat faces credit unions today due to their inability to scale; losing their member base to virtual, internet-based, financial-technology platform companies (fintechs) offering quick, easy and consumer-friendly services via mobile third-party payment applications, albeit at onerous rates.

First, bankers believe it is unfair that credit unions are exempt from federal taxation while the taxes that banks pay represent a significant fraction of their earnings—33 percent last year. Second, bankers believe that credit unions have been allowed to expand far beyond their original purpose.

Experts told us that credit unions do fail, like banks (which are also generally safe), but rarely. And deposits up to $250,000 at federally insured credit unions are guaranteed, just as they are at banks.

Credit unions tend to have fewer branches than traditional banks. A credit union may not be close to where you live or work, which could be a problem unless your credit union is part of a shared branch network and/or a large ATM network such as Allpoint or MoneyPass.

Technology integration

Credit unions are increasingly investing in digital transformation to enhance the member experience, streamline operations, and stay competitive. Mobile banking apps, online account management, and digital lending platforms are now essential offerings to meet members' evolving expectations.

Credit unions, however, are unique in that they are much safer for people to put their money into because they are less vulnerable to bank runs or liquidity issues, the same factors that caused the Silicon Valley Bank collapse in March 2023, along with the fall of several other banks.

Limited accessibility. Credit unions tend to have fewer branches than traditional banks. A credit union may not be close to where you live or work, which could be a problem unless your credit union is part of a shared branch network and/or a large ATM network such as Allpoint or MoneyPass.

If a credit union is placed into liquidation, the NCUA's Asset Management and Assistance Center (AMAC) will oversee the liquidation and set up an asset management estate (AME) to manage assets, settle members' insurance claims, and attempt to recover value from the closed credit union's assets.