Rules ease asset thresholds, conform CLF to new law

(March 19, 2021) Asset data as of March 31, 2020 will be used to determine the applicability of regulatory asset thresholds for such things as capital planning and stress testing at larger credit unions for the remainder of this year and all of next, under an interim final rule approved by the NCUA Board Thursday.

The new rule will affect about 10 large credit unions, NCUA said, including those with state charters. It is meant to mitigate the impact of the influx of savings to credit unions, particularly larger ones, during the coronavirus crisis. The savings surge has been fueled, at least in part, by federal stimulus payments (including the one just recently approved by Congress of $1,400 to individuals). Coupled with that surge, NCUA said, has been a slowdown in spending by consumers as they hunkered down for the economic downturn caused by the crisis, keeping share accounts higher.

For FICUs (federally insured credit unions) just below $10 billion in assets, these factors have resulted in their balance sheets swelling by an average of about 14 percent, and in one case by more than 34 percent,” NCUA said. “In contrast, in 2019, FICUs with assets just below the $10 billion threshold had an average asset growth of only 9 percent.”

The agency asserted that, due to the surge in assets, many FICUs have been or will be pushed over the asset thresholds subjecting them to additional regulatory requirements, or supervision by the agency’s Office of National Examinations and Supervision (ONES), which mostly oversees larger credit unions. “Complying with these new or more stringent regulatory standards would impose additional transition and compliance costs on such FICUs that otherwise may not have become subject to these requirements at this time,” NCUA stated. “This interim final rule gives affected FICUs more time to either reduce their balance sheets, or to prepare for higher regulatory standards.”

NCUA also estimated that the balance sheet growth has not significantly increased the risk profile of the affected credit unions, although the agency reserves the authority to subject a credit union to ONES supervision or to designate it as a Tier I/II/III credit union depending on the circumstances surrounding the growth and the risks associated with the type or assets held or any additional activities undertaken by a credit union.

The interim final rule – approved unanimously by the board — takes effect upon publication in the Federal Register; a comment period of 60 days was also set for the rule.

In other action, the board approved (also unanimously) another interim final rule, that one updating its regulations for the Central Liquidity Facility (CLF). The changes grew out of the passage in December of the Consolidated Appropriations Act, 2021. That legislation extended several enhancements to the CLF (such as  more flexible memberships) made in last year’s Coronavirus Aid, Relief, and Economic Security (CARES) Act. The new rule amends the NCUA’s CLF regulation to reflect these extensions. This rule also takes effect on publication in the Federal Register, and also will have a 60-day comment period.

Interim final rule: Asset thresholds

Interim final rule: CLF conforming rules