Compliance Blog

Nov 27, 2019

Is Your Credit Union Diverse?


Happy early Thanksgiving compliance friends!

Earlier this month, NCUA hosted its first annual Diversity, Equity and Inclusion (DE&I) summit. The agency described it as an event “where credit union and industry professionals who are committed to advancing diversity, equity and inclusion within the credit union system gathered to share best practices, challenges to advancing diversity, and learn how NCUA can support the industry in its efforts.” Executives from various credit unions across the country with a commitment to diversity and inclusion served as speakers and panelists at the summit. Some of the topics covered included the value of DE&I, best practices and methods for collecting diversity data, and the agency’s annual voluntary self-assessment. At the summit, NCUA Chairman Rodney Hood expressed that “financial inclusion is the civil rights issue of our era”, and announced the creation of an NCUA Culture Council.

The information below may serve as a starting point for credit unions interested in learning more about DE&I and NCUA’s Annual Voluntary Credit Union Diversity Self-Assessment.

What Does It Mean for a Credit Union to Be Diverse and Inclusive from an NCUA Perspective?

Credit unions were founded on the premise of providing provident credit to members- any member. Legally, credit unions cannot discriminate as to who they lend to, but Dodd-Frank gave new emphasis on agencies looking at diversity from an employer perspective. 

NCUA has issued several letter to credit union on diversity.  According to NCUA, the business case for diversity in credit unions is simple: diversity is a good investment. It makes good business sense to have board members, managers, and employees reflect the community the credit union serves.” See, NCUA Letter to Credit Unions 18-CU-05.

From serving a credit union’s membership perspective, diversity leads to better service, greater innovation, improved solutions and increased membership. These things make credit unions strong and sustainable, which ultimately leads to greater strength for the entire credit union system. See, NCUA Letter to Credit Unions 18-CU-05.

Annual Voluntary Credit Union Diversity Self-Assessment: What is it?

NCUA began collecting voluntary diversity self-assessments in 2016. The self-assessment is not a requirement for credit unions and has no impact on a credit union’s CAMEL rating, it contains 28 yes/no questions that can be completed online. Results are used to assess diversity in the credit union system and track progress on a year-to-year basis, to build a database of credit unions’ activities related to diversity and inclusion and to inform NCUA of areas where additional guidance could be useful. See, NCUA Letter to Credit Unions 19-CU-03. The agency’s Office of Minority Women and Inclusion (OMWI) aggregates the self-assessment data and only shares results anonymously, primarily in the NCUA’s annual OMWI Congressional Report and in the annual Voluntary Credit Union Diversity Self-Assessment Results Report.

To facilitate the self-assessment process, NCUA, together with other federal financial regulatory agencies issued an Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies to provide a framework for credit unions to create and strengthen their diversity policies and practices. The diversity standards, which are summarized in the NCUA Letter to Credit Unions 15-CU-05, focus on five keys areas:

  • Leadership commitment to diversity and inclusion;
  • Employment practices related to diversity and inclusion;
  • Supplier diversity policies and practices;
  • Transparency of diversity and inclusion practices; and
  • Assessing and monitoring diversity and inclusion practices.

On November 7, 2019, NCUA encouraged credit unions through a Letter to Credit Unions, to participate in the voluntary Credit Union Diversity Self-Assessment as a means for evaluating their institution's diversity programs and practices. 

The view from 30,000 feet: Snapshot of Results of the 2018 Voluntary Credit Union Diversity Self-Assessment

NCUA clarified the results in the report issued this year represent only a small portion of existing credit union, as only 81 credit unions out of 5,375 federally insured credit unions (or 1.5 percent) as of December 21, 2018 completed the self-assessment. Therefore, these results are not representative of the credit union system as a whole.

According to the 2018 report issued by NCUA, among other things:

  • Forty-eight percent of the credit unions who completed the assessment have established a written diversity and inclusion policy approved by senior leadership;
  • Sixty-eight percent of the reporting credit unions appointed a knowledgeable senior-level official to oversee diversity and inclusion strategies and initiatives. The same number also reported regularly conducting training on equal employment opportunity and diversity and inclusion principles;
  • Only twenty percent of the responding credit unions provided regular feedback or progress reports on their diversity and inclusion efforts to their boards and senior management;
  • Most credit unions or eighty percent, established practices to attract diverse candidates for employment and volunteer opportunities, and seventy-two percent reported such practices for selection of board member candidates and senior management;
  • Sixty-eight percent of reporting credit unions included diversity and inclusion considerations in their strategic plan for recruiting, hiring, retaining, or promoting their workforce, but only thirty percent of reporting credit unions included diversity and inclusion considerations in their strategic plan in contracting with vendors;
  • In 2018, only thirty-seven percent published demographic information on workforce composition, while seventeen percent published demographic information on board members and other officials;
  • Only seventeen percent published information on sponsorships or partnerships with diverse organizations, and nine percent published other information related to diversity and inclusion efforts;
  • Forty-nine percent of the reporting credit unions in 2018 conducted an annual self-assessment or evaluation of their diversity policies and practices, and forty percent reported modifying their policies and practices based on these assessment results;
  • Only seven percent, of reporting credit unions published information about assessing or monitoring diversity policies and practices and twenty-two percent completed and submitted the Credit Union Diversity Self-Assessment form to the NCUA on an annual basis.

NCUA encourages credit unions to adopt and implement an organizational commitment to diversity and inclusion in a manner reflective of the credit union’s size and other characteristics and to fill out the voluntary self-assessment. If your credit union would like to participate in the self-assessment, NCUA now accepts self-assessments year-round.

NAFCU has heard from many members who have participated in the self-assessment and are interested in hearing your feedback.