Trio of summaries look at CAMELS, CUSO lending, communications

(Feb. 5, 2021) Three summaries of recent NCUA proposals were posted this week by NASCUS, dealing with the addition of a new component to the examination rating system, lending  by CUSOs, and the agency’s communications program.

More specifically, the summaries (which are available to members only) outline:

  • A proposal to add an “S” (for market sensitivity) to the CAMEL rating system. At its January meeting, the NCUA Board voted unanimously to issue a proposal (for a 60-day comment period) to add the component to its rating system — an addition long supported by NASCUS for the federal regulator – especially since 24 states have already incorporated the component into their own exams. The proposal would also redefine the “L” (Liquidity Risk) component in the existing rating system. According to NCUA, if adopted, the rule would likely take effect in the first quarter of 2022. The agency said that the proposal would provide greater clarity and transparency regarding credit unions’ sensitivity to market risk and liquidity risk exposures once adopted. “The proposed addition would make the NCUA’s rating system more consistent with the other financial institution regulators’ ratings system both at the federal and state levels,” the agency said. NASCUS President and CEO Lucy Ito said, when the proposal was issued last month, that state examiners have observed for some time that the extended low-yield environment may encourage greater risk taking by financial institutions. “We urge the agency to finalize this proposal as soon as possible following the comment period and as soon as practicable following necessary technical re-programming,” she said.
  • A plan to allow CUSOs to make any loan a federal credit union (FCU) can make. Also at its January meeting, the board issued a proposal (for a 30-day comment period) that would add to the agency’s list of permissible CUSO services the expanded lending powers. The proposal expands the list of permissible loans by CUSOs from only business loans, consumer mortgage loans, student loans, and credit cards to any type of loan an FCU may originate, including, for example, automobile and small-dollar (payday) loans – the two types NCUA said would likely draw the newest involvement by CUSOs.
  • A “request for information” (RFI) from credit unions on NCUA’s communications methods. Earlier last month, the NCUA released the RFI (for a 60-day comment period) on its communications processes in an effort, it said, to “promote efficiency and increase transparency.” Specifically, the agency said, the RFI “seeks public input on how the agency can maximize efficiency and minimize burdens associated with obtaining information on federal laws, regulations, policies, guidance, and other materials relevant to federally insured credit unions.” The RFI contained questions about the effectiveness of its press releases, social media content, and the timing and frequency of agency communications. There are also questions related to improving the agency’s websites, online data resources, and the delivery and format of supervisory guidance, NCUA said.

Summary: Proposed Rule, CAMELS Rating System

NASCUS Summary: Proposed rule, CUSOs (part 712)

Summary: Request for Information, NCUA Communications & Transparency