CU provisions in COVID relief bill outlined

(Jan. 8, 2021) A number of provisions contained in the massive appropriations and coronavirus relief legislation signed into law Dec. 27 are highlighted by NCUA in a letter to credit unions sent this week.

That letter came on the heels of two other letters issued recently by the agency, addressed to federal credit unions only, but with some interest to the state system.

In its letter to credit unions 21-CU-01, NCUA notes that most of the provisions of the COVID-19 relief bill extend portions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law in March as the impact of the coronavirus crisis became apparent. The provisions are extended to Dec. 31, 2021.

More specifically, NCUA said the provisions in December’s Consolidated Appropriations Act directly affecting credit unions and their members include:

  • Extending provisions affecting the agency’s Central Liquidity Facility (CLF, which makes loans to credit unions and the National Credit Union Share Insurance Fund (NCUSIF)) to Dec. 31, 2021. Those include: an increase in the facility’s borrowing capacity (allowing it to borrow $16 (up from $12) for every $1 in capital and surplus; relaxed requirements for agent membership (making it more economical for corporate credit unions to join the facility); and extension of liquidity help directly to corporates.
  • Suspending the requirement to categorize certain loan modifications related to the COVID-19 pandemic as troubled debt restructurings (TDRs) through Jan. 2, 2022.
  • Lengthening the time for compliance with the Current Expected Credit Loss (CECL) accounting standard through Jan. 1, 2022 (although federally insured credit unions, the agency notes, are not required to comply with CECL accounting standards until Jan. 1, 2023).
  • Authorizing an additional $284.5 billion of more easily forgivable loans through the Paycheck Protection Program (PPP). In addition, the December bill sets aside funding for loans by specific institutions: not less than $15 billion for loans by community development financial institutions and minority depository institutions (CDFIs and MDIs), and not less than $15 billion from loans by financial institutions with assets less than $10 billion.

The agency also highlighted provisions in the bill allowing for $1.5 million for its Community Development Revolving Loan Fund (CDRLF) until Sept. 30, 2022; and $12 billion in COVID-19 relief funding for CDFIs that predominantly serve minority communities – with a third of that set aside for smaller financial institutions with less than $2 billion in assets.

Also this week., the agency sent a letter to FCUs (21-FCU-02) pointing out that April 15 is the due date for adjustments to 1% deposits in the NCUSIF, and FCU operating fees. The letter also notes that the overhead transfer rate (OTR, the rate at which funds are transferred from the NCUSIF to the agency’s operating budget to cover “insurance related costs”), increased to 62.3% for 2021, up 100 basis points from 2020 (at 61.3%). “This change results in a reduction to the estimated 2021 operating fee revenue compared to the 2020 operating fee collections,” the agency noted. The 2020 FCU operating fee dropped by an average of 19.6% from the previous year, NCUA said.

Finally, in letter 21-FCU-01, the agency provided updated guidance and templates which it said are intended to assist FCUs seeking to convert to a community field of membership or expand their existing community field of membership. The agency said the letter reflects a number of revisions to its chartering and field of membership manual.

NCUA letter to credit unions 21-CU-01:  Summary of the Consolidated Appropriations Act, 2021

NCUA Letter to Federal Credit Unions (21-FCU-02) Operating Fee Schedule Adjusted for 2021

NCUA Letter to Federal Credit Unions (21-FCU-01) Community Charter Conversions and Expansions