(Nov. 13, 2020) NCUA’s new, revised rule on corporate credit unions – addressing at least five key areas in current rules, including permitting the institutions to make a minimal investment in a credit union service organization (CUSO) – takes effect Dec. 14, after publication of the final rule Thursday (Nov. 12) in the Federal Register.
Adopted at the agency board’s Oct. 15 meeting, the revised corporate regulation is generally aimed at clarifying a number of provisions already in agency rules. NASCUS largely supported the revisions when proposed, although the association made some suggestions for improving or refining the regulation.
Among its key provisions, the rule:
- permits (as noted) a corporate credit union to make a minimal investment in a credit union service organization (CUSO) without the service organization being subjected to heightened agency oversight.
- expands the categories of senior staff positions at member credit unions eligible to serve on a corporate credit union’s board.
- removes the “experience and independence” requirement for a corporate CU’s enterprise risk management (ERM) expert.
- clarifies the definition of a collateralized debt obligation.
- simplifies the requirement for net interest income modeling.
Given that six of 11 corporate credit unions are state chartered, the rule has the potential for an important impact on the state credit union system. As NASCUS President and CEO Lucy Ito noted last month when the rule was finalized, provisions such as enabling corporate CUs to make minimal investments in a CUSO without triggering a “corporate CUSO” classification should enable the credit union system to stay abreast of broader fintech developments.
Unlike the proposal, the final rule does not include provisions addressing subordinated debt at credit unions. Instead, prior to issuing the final rule, NCUA decided to remove those provisions from the final, noting that they would be addressed in a later final rule on subordinated debt. A proposal was issued in January on subordinated debt; the comment period ended in July.