(April 23, 2021) While no new regulations were proposed or finalized, the NCUA Board did indicate at its meeting Thursday that final rules on two NASCUS-supported proposals – on capitalization of interest and derivatives — are nearing the point of being considered soon, according to comments during this week’s meeting.
In open session of the NCUA Board, Chairman Todd Harper said staff is “working through” issues on proposed rules for capitalization of interest and on derivatives. Harper said he was hopeful to see actions on the proposals “in the near future.”
The issue of action on proposed or pending regulations was brought up by Board Member Rodney Hood. Thursday’s meeting included only board briefings, on cybersecurity and an interim final rule addressing the impact of savings growth due to the coronavirus crisis on credit union capital.
Hood, in his comments, suggested the board work in the future “in a bipartisan manner” to develop board meeting agendas for “robust rulemaking opportunities.” Hood indicated that there are proposed rules awaiting action (and proposals waiting to be unveiled) that he and the other board members want to see move forward.
The capitalization of interest rule was proposed in November by the NCUA Board; it would remove the prohibition in agency rules against the capitalization of interest in connection with loan workouts and modifications, particularly as they struggled with the financial impact of the coronavirus crisis.
NASCUS, in its February comment letter, supported the proposal and called for its expeditious completion. NASCUS also recommended the agency reconsider the blanket prohibition against additional advances, to cover credit union fees and provide them with “the full range of options for managing and structuring loan work outs as other depository institutions.”
The derivatives rule was proposed in October; it would make the agency’s regulation less prescriptive and more “principles-based,” expanding federal credit unions’ authority to purchase and use derivatives as part of their interest-rate risk (IRR) management. NASCUS likewise supported the proposal in its December comment letter, calling for two changes: eliminate the redundant supervisory notice requirements where applicable, and incorporate exempt derivatives transactions directly into part 741.219 of NCUA rules – the section that covers federally insured state-chartered credit unions (FISCUS) and investment requirements.
NASCUS also noted that the proposal continues recognition by NCUA of the primacy of state law in determining investment authority for FISCUs.
Both items were issued for comment without objection by any members of the board.