FINCEN Proposed Rule: Uniform Financial Institutions Rating System

NASCUS Proposed Rule Summary:
Uniform Financial Institutions Rating System

June 2026
The Federal Financial Institutions Examination Council (FFIEC) is proposing[1] targeted revisions to the CAMELS framework to refocus ratings on material financial risks and financial condition, reduce subjectivity, and improve transparency.

Overall, the proposal does not change the CAMELS structure but materially changes how ratings are determined and justified.  The proposal represents a significant recalibration of CAMELS—shifting from a process-driven supervisory model toward one anchored in justification through measurable financial risk and condition striving toward mathematical components instead of examiner judgment. For state regulators and credit unions alike, the proposal could enhance consistency, reduce subjectivity, and better align supervisory outcomes with the most material risk to the Share Insurance Fund. 

However, the suggested changes could deter from supervisory conversations regarding identified systemic, programmatic weaknesses that are not yet financially material, impairing the regulators’ ability to proactively address emerging risks as they are developing but not yet critically impacting the institution.  

Comments are due to NCUA by August 17, 2026.

Background

CAMELS (officially known as The Uniform Financial Institutions Rating System or UFIRS) is the standardized framework used by federal and state regulators to evaluate the safety, soundness, and overall condition of banks and credit unions. It ensures all institutions are evaluated uniformly, prioritizing supervision where weaknesses exist.

The history of UFIRS spans four key milestones:

  1. Origins (1979) – Developed by the FFIEC in November 1979, UFIRS was established to create a uniform interagency approach to evaluate financial institutions. Originally, it used a CAMEL acronym—evaluating five components:
    1. Capital Adequacy
    1. Asset Quality
    1. Management
    1. Earnings
    1. Liquidity
  • The Major Revision and Expansion (1996) – In December 1996, FFIEC updated the framework in response to the growing complexity of the financial sector and the increased use of off-balance sheet investments. This overhaul introduced a sixth component: Sensitivity to Market Risk.  This transition established the CAMELS acronym, placing a stronger emphasis on an institution’s risk management practices and requiring examiners to tailor their evaluations based on an institution’s size and complexity.
  • The Modern Evaluation Era (Late 1990s – 2010s) – FFIEC adapts the rating system to cover more specialized operations within financial institutions. This created a family of companion rating systems, including:
    • URSIT: The Uniform Rating System for Information Technology (adopted in 1999 to specifically assess technology and data processing operations).
    • CC Rating System: The Uniform Interagency Consumer Compliance Rating System (updated in 2016 to evaluate how well institutions adhere to consumer protection laws).

Under the UFIRS framework, examiners assign a score of 1 (strongest) to 5 (critically deficient) for each of the six CAMELS categories, alongside an overall composite rating. A better composite rating allows a financial institution more freedom to engage in certain expansionary business activities and signals stability to Congress and the public.

Key Provisions of the Proposed Rule

Stronger Link to Financial Condition & Material Risk

  • Ratings (both component and composite) will prioritize factors that materially affect financial condition and risk profile.
  • Reduced emphasis on:
    • Process issues (policies, documentation)
    • Non-material deficiencies

Implication for regulators:

  • Greater need to tie examination findings directly to current measurable impact on financial risk or condition.
  • Examiner judgment must clearly demonstrate materiality.

Implication for credit unions:

  • Less risk of downgrade for technical/process weaknesses alone.
  • Greater focus on capital, earnings, liquidity, and asset performance outcomes.

Removal of “Special Consideration” for Management Rating

  • Eliminates the requirement to highlight the impact of the Management (M) component in composite ratings.

Implications:

  • More mathematically averaged composite scoring across components without flexibility for supervisory discussions changes to the risk profile.
  • Reduced subjectivity historically tied to Management ratings decreasing the value of examination reporting for board consideration of the institution’s overall risk profile.
  • Composite ratings that only reflect current overall financial condition, not examiner perception of risk management competencies.

Redefinition of Management Component (Major Changes)

  • Narrowed to core risk management effectiveness tied to material financial risk
  • Removes factors such as:
    • Management depth/succession
    • Responsiveness to examiners
    • Community service considerations
  • Introduces a heightened threshold for downgrades:
    • Ratings of 3 or worse generally require material financial risk, unreliable reporting, asset safeguarding failures, or significant noncompliance.

Implications:

For regulators:

  • Must justify Management downgrades based on tangible risk impacts, not qualitative concerns alone.

For credit unions:

  • Reduced likelihood of downgrade based solely on governance or examiner disagreement absent financial impact.

Limiting Impact of Specialty Exam Findings

  • Specialty areas (e.g., BSA/AML, IT, compliance) only affect CAMELS ratings if:
    • They impact financial condition
    • Represent material financial risk
    • Or reflect significant legal noncompliance

Implications:

  • Reduced “double counting” of findings into CAMELS ratings.
  • More clear separation between compliance exams and safety/soundness ratings.

Revised Composite Rating Definitions (1–5)

  • Introduces clearer thresholds tied to financial performance and material risk:
    • 1–2: Strong/satisfactory financial performance with only minor/moderate weaknesses
    • 3: Requires material financial risk or less than satisfactory performance
    • 4–5: Require deficient or critically deficient financial condition

Implications:

  • Ratings of “3” or worse must be supported by demonstrable financial weakness, not just process deficiencies.[2]
  • Raises the bar for downgrades.
  • Enhances consistency across examiners and agencies.

Clearer, More Prescriptive Evaluation Factors

  • Removes “but not limited to” language and replaces with:
    • Defined evaluation factors
    • Additional factors allowed only in exceptional cases, with documentation required
  • Adds specific measurable factors across components:
    • Liquidity: cash flow forecasting, contingency funding
    • Capital: sustainability across economic conditions
    • Earnings: funding costs, commodity exposure
    • Market risk: explicit net interest income sensitivity

Implications:

  • More standardized examinations across states and federal regulators.
  • Improved predictability of ratings for institutions.
  • Deter preemptive discussions in evolution of new products/services and related risks not specifically addressed in CAMELS narratives.

Reduced Emphasis on Broad “Risk Management” Language

  • Replaces high-level expectations with component-specific, measurable expectations.

Implications:

  • Less ambiguity in exams.
  • Stronger alignment between exam findings and measurable financial metrics.
  • Deter preemptive discussions in evolution of new products/services and related risks not specifically addressed in CAMELS narratives.

Improved Transparency and Consistency

  • Standardizes terminology:
    • Financial condition: “strong,” “satisfactory,” “deficient”
    • Risk management: “effective,” “adequate,” “inadequate”
  • Requires clearer documentation when deviating from standard factors.

Implications:

  • Greater defensibility of ratings.
  • Clarity of communication with boards and management.

Modernization of Framework

  • Updates terminology (e.g., ALLL → ACL under CECL)
  • Removes references to reputation risk

Implications:

  • Aligns CAMELS with current accounting and supervisory policy direction.

[1] 91 FR 29128

[2] As of 12/31/2025 NCUA reports 653 federally insured credit unions holding 7.8% of NCUA insured deposits were as 3 rated and117 federally insured credit unions holding .6% of insured deposits are rated 4 or 5.

Consumer Financial Protection Bureau (CFPB) Small Business Lending Final Rule
12 CFR Part 1002

The Consumer Financial Protection Bureau (CFPB) is revising certain provisions of the Equal Credit Opportunity Act (ECOA)/Regulation B.  The Bureau is amending coverage of certain credit transactions and financial institutions; the small business definition; inclusion of certain data points and how others are collected; and the compliance date.  The Bureau believes these changes will streamline the rule, reduce complexity for lenders, improve data quality, and advance the purposes of Section 1071.

The final rule becomes effective on June 30, 2026; the compliance date for the rule is January 1, 2028.  You can find the final rule here.

Summary

In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act.  Section 1071 of Dodd Frank amended the Equal Credit Opportunity Act (ECOA) to require that financial institutions collect and report to the Bureau certain data regarding applications for credit or women-owned, minority owned and small businesses.  Section 1071’s statutory purposes are to (i) facilitate enforcement of fair lending laws, and (ii) enable communities, governmental entities, and creditors to identify business and community development needs and opportunities of women-owned, minority-owned and small businesses.  Section 1071 directs the Bureau to prescribe such rules and issue such guidance as may be necessary to carry out, enforce and compile data pursuant to Section 1071.

This final rule revises several provisions under the 2023 Small Business Lending final rule.  According to the amended final rule, the Bureau now believes a longer-term approach to advancing the statutory purposes of Section 1071 would be to narrow the scope of the data collected and to limit (as much as possible) any negative impact to the provision of credit to small businesses.

Covered Credit Transactions

  • The Bureau concluded that data collection under the rule (at least initially) should focus on the core, widely used lending products most likely to be foundational to small businesses’ formation and operation.
  • The final rule excludes merchant cash advances, agricultural lending and small dollar loans from the definition of covered credit transaction.

Covered Financial Institutions

  • Data collection under the revised final rule will be limited to larger, core lenders.
  • Farm Credit System(FCS) lenders are excluded from coverage. 
  • The rule raises the origination threshold from 100 to 1000 covered transactions for each of two consecutive years.

Small Businesses

  • The final rule defines a small business as one with a gross annual revenue of $1 million or less.  The rule decreased the gross annual revenue threshold from $5 million or less.

Data Points

  • Under the revised final rule, data collection will focus specifically on data points specified in Section 1071 and a limited number of other data points needed to facilitate the collection of statutory data points. 
  • The final rule removes the discretionary data points for application method, application recipient, denial reasons, pricing information and number of workers.
  • The final rule amends the provisions on time and manner of data collection to remove certain requirements that are not statutorily required and appear to anticipate or presume non-compliance with the rule.

Compliance Dates

  • The revised final rule extends the compliance date to January 1, 2028 for all institutions that are covered by the rule.
  • The revised final rule also features a “special transitional rule” that permits (but does not require) financial institutions to use the calendar years 2025 and 2026, instead of 2026 and 2027, for purposes of determining whether they must comply with the rule beginning January 1, 2028.

CFPB Final Rule Summary: Equal Credit Opportunity Act (Regulation B)
12 CFR Part 1002

The Consumer Financial Protection Bureau (CFPB) issued a Final Rule on the Equal Credit Opportunity Act.

The final rule is effective as of July 21, 2026 and the rule can be found here.

Summary

The Consumer Financial Protection Bureau (CFPB) issued a final rule that amends provisions related to disparate impact, discouragement of applicants or prospective applicants, and special purpose credit programs under Regulation B, the regulation that implements the Equal Credit Opportunity Act (ECOA). 

In November 2025, the Bureau issued a notice of proposed rulemaking amending Regulation B.  The Bureau is now finalized the rule as proposed.  Specifically, the Bureau amended provisions in Regulation B, 12 CFR Part 1002, pertaining to whether disparate impact is cognizable under the Act; under what circumstances a creditor may be deemed to be discouraging an applicant or prospective applicant; and under what conditions a creditor may offer special purpose credit programs (SPCPs).

The final rule provides that ECOA does not authorize disparate-impact liability (effects test); it redefines “discouragement” under the regulation and adds prohibitions/conditions for Special Purpose Credit Programs (SPCP).

Disparate Impact 

  • Under a disparate impact claim, a plaintiff may challenge unlawful discrimination facially neutral policies that have a disproportionate effect along prohibited basis lines.  The rule notes that the Supreme Court has held that disparate impact claims are cognizable under certain statutes such as under the Age Discrimination in Employment Act (ADEA), the Fair Housing Act (FHA), etc.  However, the Bureau notes that the Supreme Court has not examined whether a disparate-impact claim is permitted under the Equal Credit Opportunity Act (ECOA). 
  • The rule also notes that the ECOA does not specifically state that disparate impact claims are cognizable under the Act nor does it contain “effects-based language” that has been found in other statutes to invoke disparate-impact liability.  The Bureau has previously relied on legislative history to authorize disparate impact liability. 
  • Under the revised final rule, the Bureau now determines that the previous conclusions that disparate impact claims are cognizable under ECOA are incorrect and not the best interpretation of ECOA.  The Bureau now concludes that “effects-based language” text is crucial for interpreting the status and in the absence of effects-based language or other textual signals indicating that disparate-impact liability is cognizable, the Bureau determined that the best reading of the ECOA does not authorize disparate-impact liability.

Discouragement

  • Regulation B provides that “a creditor shall not make any oral or written statement, in advertising or otherwise, to applicants or prospective applications that would discourage on a prohibited basis a reasonable person from making or pursuing an application.  Language regarding the prohibition of discouragement was implemented in the final rule of 1975. At the time, the Federal Reserve Board stated that it believed a prohibition against discouragement was “necessary to protect applicants against discriminatory acts occurring before an application is initiated.”  At the time, the Board believed this provision was necessary to prevent creditors from circumventing the ECOA’s prohibition against discrimination by deterring prospective applications from even applying for credit.
  • The final rule revised the discouragement provision.  The Bureau notes that the previous interpretation of this provision was too broad and was applied to scenarios that should not be characterized as “discouragement” under the ECOA.  In particular, the revised rule is intended to protect creditor statements that may be controversial but would not cause a “reasonable” person to believe that the creditors would deny them credit or offer them credit on less favorable terms than other borrowers.  The Bureau further relays its concern that constraints on these types of business practices and statements harm the marketplace by unnecessarily regulating business practices and limiting expression. The rule concludes that such controversial statements do not rise to the level of statements an “objective creditor would know, or should know, would cause a reasonable person to believe the creditor would deny them credit or offer them credit on less favorable terms than other borrowers.   

Special Purpose Credit Programs

  • Generally, the ECOA prohibits a creditor from discriminating on a prohibited basis regarding any aspect of a credit transaction.  However, Section 701(c)(3) states that it does not constitute discrimination under the Act for a creditor “to refuse to extend credit offered pursuant to…any special purpose credit program offered by a profit-making organization to meet special social needs which meets standards prescribed in regulations by the Bureau.   
  • According to the relevant legislation history, the intent of this section of the ECOA, is to authorize the Board (and now Bureau) to specify standards for the exemption of classes of transactions when it has been clearly demonstrated on the public record that without such exemption the consumers involved would effectively be denied credit. 
  • An SPCP is permitted to require its participants to share one or more common characteristics that would otherwise be prohibited bases so long as the program does not evade the requirements of ECOA or Regulation B.   Under the revised final rule, an SPCP is prohibited from using race, color, national origin or sex of the applicant, as the “common characteristic” in determining eligibility for the SPCP.  The Bureau concluded that an SPCP offered or participated in by a for-profit organization that uses race, color, national origin or sex as eligibility criteria is beyond what is necessary to meet the congressional intent of SPCPs.
  • In addition, the Bureau has adopted new “conditions” that should be used to determine eligibility for such programs.  Under the new final rule, religion, marital status, age or income derived from a public assistance program should be used as eligibility criteria. 

NASCUS Proposed Rule Summary
NCUA Rules & Regulations 12 CFR Parts 702, 704, 706, 745, and 747: Implementing the Guiding and Establishing National Innovation for U.S. Stablecoins Act for the Issuance of Stablecoins by Entities Subject to the Jurisdiction of the National Credit Union Administration

May 2026
The NCUA proposes amendments to 12 CFR Parts 702, 704, 706, 745, and 747 to implement portions of the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) [1].  The proposal supplements proposed regulations issued in February 2026 through the creation of a new 12 CFR Part 706[2], which establishes a federal framework for licensing and supervising Permitted Payment Stablecoin Issuers (PPSIs) that are subsidiaries of federally insured credit unions (FICUs).

Key issues covered by this rule include:

  • Operational standards for stablecoin issuers
  • Reserve and liquidity requirements
  • Risk management and governance
  • Redemption obligations
  • Custody, reporting, and supervision
  • Capital and operational resilience

The proposed rule may be read in its entirety here[3].

Comments are due to NCUA by July 17, 2026.

Background

Under the GENIUS Act, “insured depository institutions,” which the Act defines to include both FDIC-insured depository institutions and FICUs (collectively “IDIs”), cannot be issuers of payment stablecoins. Instead, IDIs must issue stablecoins indirectly through subsidiaries.

The GENIUS Act defines the term “subsidiary of an insured credit union” to mean:

  1. an organization providing services to the insured credit union that are associated with the routine operations of credit unions, as described in section 107(7)(I) of the Federal Credit Union Act[4];
  2. a credit union service organization, as such term is used under CFR 12 part 712, with respect to which the insured credit union has an ownership interest or to which the insured credit union has extended a loan; and
  3. a subsidiary of a State chartered insured credit union authorized under State law.

Under the Genius Act, only state or federally authorized PPSIs may issue a payment stablecoin in the United States, subject to certain exceptions and safe harbors. PPSIs are subject to a number of requirements, including requirements related to reserves, capital, liquidity, illicit finance, and information technology risk management standards. Among those requirements, PPSIs must:

  •  maintain reserves backing the stablecoin on a one-to-one basis using U.S. currency or certain other liquid assets;
  •  publicly disclose their redemption policy; and
  • publish the details of their reserves monthly.

The GENIUS Act details the process for the federal bank agencies (FBAs), which include the NCUA, the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Board of Governors of the Federal Reserve System (Federal Reserve Board), to administer application for PPSI licenses, PPSI examination and supervision, and enforcement authority.

The GENIUS Act also addresses provision of custody services for payment stablecoins; application of the Bank Secrecy Act and anti-money laundering and economic sanctions requirements; treatment of payment stablecoin issuers in insolvency proceedings; and disclosures related to the absence of federal backing and deposit insurance for stable coins[5]

Key Provisions of the Proposed Rule

To  implement the GENIUS Act by establishing a regulatory framework for payment stablecoins issued through FICU  subsidiaries, the proposal introduces the new Part 706, issued for comment in February (NASCUS comments may be read here), as the core regulatory structure and makes conforming amendments to Parts 702 (Capital), 704 (Corporate CUs), 745 (Share Insurance), and 747 (Enforcement) to integrate stablecoin activities into the existing credit union federal regulatory regime.

Proposed changes to Parts 702, 704, 706, 745, and 747 include:

  • Terminology updates to incorporate stablecoin-related definitions
  • Alignment with:
    • GENIUS Act statutory framework
    • New Part 706 requirements
  • Clarifications to avoid:
    • Misinterpretation of stablecoins as insured products
    • Regulatory gaps across credit union activities

What is fundamentally changing:

  • Part 706 introduces an entirely new supervisory regime for stablecoin issuance.
  • Other parts (702, 704, 745, 747) are conformed to align the stable coin rules with the existing credit union regulatory structure.

Strategic implications:

  • FISCU credit unions must comply with a single NCUA authorized entry point into stablecoin activities
  • NCUA gains:
    • Potential foothold into future authority over FISCU subsidiaries
    • Preemption of SSA authority to allow investment in a state authorized PPSI
    • Enhanced risk containment tools
  • The rule requires:
    • A strict firewall between insured shares and stablecoins
    • A strong emphasis on liquidity, transparency, and prudential discipline

For Credit Unions

  • Limits options by mandating a single, NCUA regulated pathway into digital payments innovation for all federally insured credit unions
  • Requires significant investment in:
    • Governance
    • Technology infrastructure
    • Liquidity and risk management systems
  • Requires use of CUSOs and/or structured subsidiaries

For Regulators

  • Expands NCUA role into digital asset supervision, as well as authority over subsidiaries and/or CUSOs
  • Preempts the federal-state dynamic:
    • Federal dominance for FICU PPSI authorization and investment
    • State role preserved for consumer protection

Section-by-Section Analysis

12 CFR Part 702 – Capital Adequacy (Natural Person Credit Unions)

§702.2 – Net Worth (Definition)

Change: Deconsolidation of PPSI financials

  • Requires FICUs to exclude (deconsolidate) PPSI subsidiary financials from regulatory capital:
    • For regulatory capital purposes, remove PPSI assets, liabilities, and equity from balance sheet.
    • Deduct retained earnings attributable to the PPSI (if not up streamed).
    • Remove investments/receivables from the PPSI from total assets.

§702.104 – Risk-Based Capital Ratio

  • Mirrors above treatment:
    • Ensures PPSI-related exposures do not inflate risk-based capital.
    • Applies consistent deduction/adjustment (deconsolidation) approach across capital measures.

Implication                  

  • Prevents:
    • Double counting of capital.
    • Artificial capital strength from stablecoin subsidiaries.

12 CFR Part 704 – Corporate Credit Unions

§704.2 – Definitions (Retained Earnings & Tier 1 Capital)

Retained Earnings

  • Must exclude income retained by a consolidated PPSI unless distributed.

Tier 1 Capital

  • Adjustments parallel Part 702:
    • Deconsolidate PPSI-related balances.
    • Exclude:
      • PPSI equity
      • PPSI-related assets/receivables

Capital and Asset Calculations

  • Investments in PPSIs:
    • Removed from capital base.
    • Avoid artificial enhancement of leverage capacity.

Implication

  • Ensures:
    • Corporate credit unions do not leverage stablecoin subsidiaries for capital benefit.
    • Alignment with safety and soundness principles.

12 CFR Part 706 (See also Proposed Rule for 12 CFR Part 706[6])

Subpart A – Licensing & Approval (12 CFR Parts 706.101 – 112)

  • Establishes requirements for:
    • Approval of FICU subsidiaries as Permitted Payment Stablecoin Issuers (PPSIs).
  • Includes:
    • Joint applications (subsidiary + FICU parent).
    • Evaluation of:
      • Directors/officers (integrity, background checks)
      • Ownership/control structures
    • Ongoing approval conditions.

Subpart B – Operational Standards

Permitted Activities (§706.201)

Limited to:

  • Issuance and redemption of stablecoins
  • Reserve management
  • Custody/safekeeping
  • Ancillary supporting functions (assess fees/facilitate transactions)

Prohibited Activities

  • Paying interest or yield on stablecoins
  • Rehypothecation of reserves
  • Misrepresenting federal backing/insurance
  • Deceptive naming (e.g., “U.S. backed”)

Reserve Requirements (§706.202)

Core prudential requirement: 1:1 backing

Key Components:

  • Must maintain reserve assets ≥ outstanding issuance value
  • Reserves must be:
    • Identifiable
    • Segregated
    • Held at eligible institutions

Permissible Reserve Assets:

  • Cash
  • Deposits/share accounts
  • Short-term Treasuries (≤93 days)
  • Repo/reverse repo
  • Government money market funds
  • Approved liquid federal assets
  • Tokenized forms of the above

Additional Requirements:

  • Monthly:
    • Public reserve disclosure
    • Independent audit
  • Liquidity and diversification standards (two approaches proposed):
    • Principles-based OR
      • Sufficiently diverse to manage potential credit, liquidity, interest rate, and price risks.
      • Monitor and manage concentrations of risk profile
      • Plus limits found in prescriptive language option below
    • Prescriptive thresholds
      • 10% of reserve assets as deposits or FRB deposits
      • 30% of reserve assets as deposits or FRB deposits unconditionally receivable within five days
      • No more than 40% of reserve assets at any one eligible financial institution
      • No more than 50% of the 10% reserve requirement in any one eligible financial institution
      • Maintain reserve asset weighted average maturity of no more than 20 days

Redemption Requirements (§706.203)

  • Must:
    • Redeem at par value
    • Within ≤2 business days
  • Stress provision:
    • If >10% redeemed in 24 hours → up to 7 days redemption
  • Mandatory disclosures:
    • Redemption procedures
    • Fees
    • Issuer identity

Risk Management (§706.204)

Comprehensive standards including:

  • Internal controls and audit functions
  • Interest rate and liquidity risk
  • Insider/affiliate transactions
  • Third-party/vendor risk
  • IT and cybersecurity controls
  • Business continuity and incident response
  • BSA/AML and sanctions compliance


Supervision & Reporting (§706.205)

Examinations:

  • Default: Annual full-scope exam
  • Extended cycle (14–24 months) possible for smaller/low-risk PPSIs

Reporting:

  • Weekly supervisory data (confidential)
  • Quarterly financial reports
  • Annual audit (for large issuers)

Enforcement:

  • Authority to:
    • Require remediation plans
    • Suspend issuance
    • Force liquidation (if reserve failures persist)

Subpart C – Custody Requirements (§706.301 – 304)

Applies to “Covered Custodians”:

  • FICUs or PPSIs holding:
    • Reserve assets
    • Stablecoins used as collateral
    • Private keys

Core Requirements:

  • Assets treated as customer property
  • Strict segregation / non-commingling
  • Protection from creditor claims
  • Oversight of sub-custodians

Subpart D – Capital Framework (§706.400 – 402)

Key Elements:

  • Minimum capital requirement:
    • Tailored, case-by-case (no fixed ratio initially)
  • Capital components:
    • Common equity tier 1
    • Additional tier 1

Operational Backstop:

  • PPSIs must maintain:
    • Highly liquid assets covering operating expenses

Subpart E – AML/CFT Oversight (§706.501 – 504)

  • Incorporates:
    • Bank Secrecy Act
    • Treasury/FinCEN requirements
  • Provides:
    • NCUA supervisory and enforcement framework

12 CFR Part 745 – Share Insurance

§745.2 – Account Definition (Technology Neutrality)

New Clarification in Definition

  • Insurance eligibility is independent of technology:
    • Applies equally to:
      • Traditional accounts
      • Tokenized share accounts (DLT/blockchain)

§745.6 – Corporate Accounts

Key Clarification

  • PPSI reserve accounts:
    • Insured as a single corporate account only
    • No pass-through insurance to stablecoin holders

Limitations

  • Only applies where:
    • Product meets statutory “share account” definition
  • Tokenized products:
    • Not automatically insurable unless structured correctly

Practical Impact

  • Retail stablecoin holders are NOT insured
  • PPSI funds:
    • Treated like corporate deposits
  • Clarifies:
    • No implicit federal guarantee for stablecoins

[1] Public Law 119-27

[2] 91 FR 6531

[3] 91 FR 28956

[4] 12 U.S.C. 1757(7)(I)

[5] See 12 U.S.C. 5903(e).

[6] 91 FR 6531

NASCUS Proposed Rule Summary
NCUA Rules & Regulations 12 CFR 711.3(c) and 12 CFR 711.6(b)(2) – Thresholds Increase for Major Assets Prohibition of the Depository Institution Management Interlocks Acts Rule

May 2026
As part of its eleventh wave of the “Deregulation Project,” NCUA is proposing to amend two provisions in Part 711, which implements the Depository Institution Management Interlocks Act (DIMIA) for credit unions. The proposal would increase the major assets prohibition thresholds from $1.5 billion and $2.5 billion to $10 billion and would also remove a rebuttable presumption related to depository institutions controlled or managed by women or minority group members.

Part 711 applies to Federally Insured State Credit Unions (FISCUs) by reference in Part 741.209.
The proposal may be read in its entirety here: Part 711 Threshold Increase Proposal.

Comments are due to NCUA by July 6, 2026.

Background and Proposed Changes

Part 711.3(c) generally restricts certain management officials from serving at multiple unaffiliated depository organizations when the interlock may raise competitive concerns. Under the current major assets prohibition, an exemption is required when a management official of a depository organization with assets of $2.5 billion also serves at an unaffiliated depository organization with assets over $1.5 billion. The proposal would raise both of those thresholds to $10 billion.

The Board states the proposed threshold increase would better align the major assets prohibition with the intent of DIMIA by focusing on the restriction on larger institutions that may create broader competitive concerns, rather than smaller institutions operating primarily in regional markets that do not pose the same competitive risks. The Board also states the proposed changes will better reflect market growth since 1996, noting regulatory reporting shows total assets have grown by more than 341%, and would reduce the number of organizations currently required to seek exemptions.

The Board is also proposing to remove a rebuttable presumption under Part 711.6(b) that currently applies during the exemption review process for institutions controlled or managed by women or minority group members. Under the current framework, those organizations are presumed not to create a monopoly or substantial competition concern when seeking approval for otherwise prohibited interlocks. With limited discussion, NCUA proposes eliminating the rebuttable presumption in favor of institutions controlled by women or minorities as “overly broad” and raising “equal protection concerns under the US Constitution.”

Key Considerations:

  • NCUA noted that other federal banking agencies have already adjusted their DIMIA thresholds to $10 billion in 2019, so the proposed changes to the asset threshold would bring NCUA’s asset threshold in line with those agencies. However, the other federal banking agencies have not removed the rebuttable presumption language.
  • The proposal states the Board anticipates that raising the thresholds will help credit unions with less than $10 billion in assets identify qualified directors by eliminating the need to file exemption requests.
  • The proposal does not eliminate the management interlocks framework; it only raises the major assets thresholds. Community and Relevant Metropolitan Statistical Area (RMSA) prohibitions would still apply where relevant.

NASCUS Summary
FinCEN & OFAC Proposed Rule to Implement the GENIUS Act’s Requirements to Counter Illicit Finance

April 2026
On April 8, 2026, FinCEN and Office of Foreign Assets Control (OFAC) issued a joint proposed rule to implement the anti-money laundering (AML) and sanctions provisions related to the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), establishing compliance expectations for permitted payment stablecoin issuers (PPSIs). The proposal introduces a tailored framework designed to address illicit finance risks associated with payment stablecoins. 

The proposal may be read in its entirety here: PPSI AML/CFT Program.

Comments are due by June 9, 2026.

Proposed Rule

Within this proposal, there are many requirements that mirror the recent FinCEN proposed rulemaking around updating the AML/CFT program for banks and credit unions (FinCEN & Federal Banking Agencies Proposal).  However, this proposal focuses on designing a new framework for a newly defined regulatory category.  The proposal reaches beyond traditional AML requirements by also addressing sanctions compliance, technical transaction control capabilities, and to the extent it may occur, certain secondary market stablecoin activity.

The proposal formalizes sanctions compliance expectations by incorporating OFAC requirements directly into the AML/CFT framework for PPSIs. PPSIs would be required to establish and maintain an effective sanctions compliance program consistent with the GENIUS Act, reflecting the cross-border and rapid settlement nature of stablecoin transactions.

Strong emphasis is given within the proposal around the role of senior management in reviewing and approving AML/CFT and sanctions compliance. PPSIs are expected to ensure that senior management is actively engaged in program design, implementation, and ongoing effectiveness, reinforcing clear accountability for managing illicit finance and sanctions risks.

The proposal also outlines expectations related to examination, enforcement, and coordination with FinCEN.  It appears to be consistent with the broader AML/CFT reform proposal by referencing increased FinCEN involvement in significant supervisory and enforcement matters through consultation.

The proposal is intended to implement the GENIUS Act’s directive that PPSIs be treated as financial institutions for purposes of the Bank Secrecy Act (BSA) and be subject to federal laws relating to sanctions, AML/CFT, customer identification, and ongoing due diligence.  The proposal focuses on the view that payment stablecoins present distinct illicit-finance and sanctions risk that warrant a tailored regulatory framework, rather than relying only on existing rules. These requirements introduce a broad set of operational expectations that will require PPSIs to develop and integrate AML/CFT, sanctions, governance, and technical controls.

This framework will also operate alongside existing state regulatory and supervisory structures, underscoring the importance of coordination and clarity across federal and state oversight systems.

The proposal applies the recently proposed broader AML/CFT program framework to PPSIs, requiring the PPSIs  to establish and maintain a reasonably designed and effective program.

  • Establish focuses on program design, including the development of policies, procedures, and controls tailored to the institution’s risk profile.
  • Maintain focuses on ongoing implementation and effectiveness, including the institution’s ability to identify, address, and remediate deficiencies over time.

This distinction creates a clearer framework for evaluating whether issues stem from program design or execution, helping to differentiate between structural weaknesses and breakdowns in implementation.  The framework also reinforces that AML/CFT programs must remain current and evolve with the institution’s risk profile.  This will be particularly important for PPSIs as they evolve and their risk profiles change.

As with the FinCEN and federal banking agencies’ proposed rules, this proposal generally maintains a pillar-based structure consistent with existing AML/CFT program expectations:

  • Internal Controls – Requires PPSIs to implement policies, procedures, and controls that are risk-based and reasonably designed to manage identified illicit finance risks.
  • Independent Testing – Establishes  the requirement for independent testing of the AML/CFT program, with an emphasis on evaluating overall effectiveness rather than checklist compliance. Testing must be conducted by personnel independent of the AML/CFT function.
  • BSA/AML Officer – Requires designation of a qualified individual responsible for program oversight and implementation, who must be located in the United States and accessible to regulators.
  • Training – Requires ongoing, risk-based, and role-specific training aligned to the PPSI’s products, services, and risk exposure.
  • Customer Due Diligence (CDD) – Remains a core component of the program but is integrated into the broader AML/CFT framework (e.g., internal controls), eliminating the standalone “fifth pillar” construct, and incorporates expectations for enhanced due diligence in higher-risk scenarios

Customer Identification Program (CIP) – While the proposal does not establish a formal CIP requirement, it introduces identification and verification expectations for PPSIs, including procedures related to beneficial ownership that align with existing CIP standards.  The proposal also defines the concept of an “account” for PPSIs, indicating that a more comprehensive CIP framework will be implemented through future rulemaking. In addition to these core elements, the proposal introduces requirements tailored to the unique risks associated with payment stablecoins:

  • Risk Assessment – Requires PPSIs to identify, assess, and periodically update their risk profiles, including risks associated with blockchain-based activity, transaction flows, and customer types.
  • Technology and Monitoring – Emphasizes the use of appropriate technology and monitoring systems to identify and address illicit finance risks associated with digital assets, including transaction monitoring across blockchain environments where applicable.
  • Sanctions Compliance – Requires PPSIs to establish and maintain an effective sanctions compliance program consistent with OFAC requirements, reflecting the cross-border and rapid settlement nature of stablecoin transactions.
  • Reporting and Information Sharing – Establishes requirements to identify and report suspicious activity through a Suspicious Activity Report (SAR) to law enforcement and national security authorities, consistent with BSA requirements and Treasury priorities.
    • SAR Thresholds: Establishes SAR reporting threshold for PPSIs of $5,000, compared to $2,000 for money service businesses (MSBs), reflecting FinCEN’s expectation that PPSIs operate with customer identification requirements more similar to traditional financial institutions.

The proposal also incorporates recordkeeping and Travel Rule requirements consistent with the Bank Secrecy Act, requiring PPSIs to maintain and transmit certain transaction information where applicable. This reflects Treasury’s expectation that payment stablecoin activity be subject to similar transparency standards as traditional financial transactions.

Obligations for Primary and Secondary Market Activity

The proposal also addresses the treatment of payment stablecoins in secondary market activity, recognizing that PPSIs may not have direct visibility into secondary market transactions. As a result, AML/CFT obligations are focused on the activities and risks within the PPSI’s control, while still expecting institutions to consider broader distribution channels, including blockchain based activity, and associated illicit finance risks.

Consistent with this approach, FinCEN does not contemplate applying customer due diligence (CDD) requirements to secondary market activity and therefore does not extend beneficial ownership information collection to these transactions. Similarly, SAR expectations are not intended to apply broadly to secondary market activity where the PPSI lacks visibility or control, reinforcing that reporting obligations are tied to information reasonably available to the institution.

The proposal emphasizes the importance of technical capabilities in this area. PPSIs are expected to maintain the ability to identify and respond to impermissible activity within their control, including the capability to block, freeze, or reject transactions that violate applicable laws, rules, or regulations.

Key Considerations

  • The proposal includes a substantial number of requests for comment. The breadth of these questions, particularly in areas such as technical controls, secondary market activity, and implementation expectations suggests that the final rule may evolve significantly based on industry input during the comment process.
  • This proposal is notable because it goes beyond application of existing AML/CFT expectations by creating a tailored framework for PPSIs as a newly defined category of regulated financial institutions with unique aspects
  • The proposal is broader than the standard BSA rulemaking. It combines FinCEN AML/CFT requirements with a distinct OFAC sanctions compliance framework, signaling that sanctions risk is being treated as a core compliance expectation for PPSIs rather than as a secondary consideration.
  • While the proposal outlines a framework that limits AML/CFT obligations to risks within the PPSI’s control, the treatment of secondary market activity remains a key area of uncertainty. In particular, how expectations evolve around monitoring, reporting, and technical controls in environments where PPSIs lack direct visibility may be a central focus of industry feedback during the comment process.
  • Technical control expectations within the proposal could create challenges, particularly where token activity occurs outside a traditional account-based structure.  This is another area where Treasury’s request for comments suggests it recognizes the requirement may be one of the more difficult aspects to implement.
  • While portions of the proposal are framed in principle-based terms, the rule would require significant compliance infrastructure around AML/CFT governance, sanctions governance, reporting, recordkeeping, and especially technical controls.  Treasury’s proposed 12-month implementation period seems likely to be a central focus of industry feedback given the scope and complexity of the required program buildout.

Summary on the NPRM: GENIUS Act Principles for Determining Whether a State-Level Regulatory Regime is Substantially Similar to the Federal Regulatory Framework

12 CFR Chapter XV

The Department of Treasury issued a proposal to implement Section 4(c) of the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act by establishing broad-based principles for determining when a State-level regulatory regime is substantially similar to the Federal regulatory framework.

Comments on the NPRM are due by June 2, 2026, and the notice can be found here.

Summary:

The GENIUS Act provides a comprehensive framework for the regulation of payment stablecoins. The Act defines a payment stablecoin as a digital asset (i) that is, or is designed to be used as a means of payment or settlement and (ii) the issuer of which is obligated to convert, redeem, or repurchase for a fixed amount of monetary value and represents or creates the reasonable expectation that it will maintain a stable value relative to a fixed amount of monetary value.  Under the GENIUS Act, only permitted payment stablecoin issuers may issue a payment stablecoin in the United States, subject to certain exceptions and safe harbors.

Relevant Entities

Under the proposal, a state qualified payment stablecoin issuer is defined as an entity legally established under the laws of a state that is not an uninsured national bank (chartered by the OCC), a Federal branch, an insured depository institution, or a subsidiary of such national bank, Federal branch or insured depository institution.  For most states, this leaves nonbanks as eligible state qualified payments stablecoin issuers (with a consolidated total outstanding issuance of payment stablecoins of no more than $10 billion). Any state banks that are licensed as state qualified payment stablecoin issuers must be uninsured banks.

 In addition, a state qualified payment stablecoin issuer may opt for state regulation as long as the state level regulatory regime is substantially similar to the Federal regulatory framework and the Stablecoin Certification Review Committee has approved the state-level regulatory regime meets or exceeds the standards and requirements described in Section 4(a) of the Act.

Federal and State Regulatory Regimes

The Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA) and the Office of the Comptroller of the Currency (OCC) are the primary Federal payment stablecoin regulators and are generally tasked with establishing a process/framework for the licensing, regulation, examination and supervision of permitted payment stablecoin issuers.

However, the Act does provide for a state-level regulatory regime provided those requirements are “substantially similar to the Federal regulatory framework” that has been reviewed and approved by the Stablecoin Certification Review Committee. The proposed rule would require the Stablecoin Certification Review Committee to determine that a state regulatory regime “meets or exceeds” the core prudential standards and requirements of the Act, while providing some flexibility for states to design their own requirements for other topics such as capital standards, applications, licensing, supervision, and enforcement. In addition, the proposal includes broad based principles for determining whether a state-level regulatory regime is substantially similar to the Federal regulatory framework under the Act.

Under the proposal a “federal regulatory framework” includes (i) the text of all relevant provisions of the Act, (ii) any interpretations thereof, or regulations thereunder issues by the OCC and published in the Federal Register; (iii) any regulations, interpretations, or orders issued by the Department of Treasury and (iv) with respect to Section 4(a)(8) of the Act.  Treasury proposes that the OCC’s interpretations and regulations published in the Federal Register should be the baseline for comparison to a State-level regulatory regime.

The Treasury proposes to define a “state-level regulatory regime” as (i) all statutes enacted by the State regarding payment stablecoins, (ii) any regulations regarding payment stablecoins or that apply to a state qualified payment stablecoin issuer issued by a state payment stablecoin regulator of the state; and (iii) any interpretations thereof or guidance thereunder, only to the extent they are enforceable against state qualified payment stablecoin issuers.  

Uniform Requirements v. State Calibrated Requirements

The proposal also established broad based principles (uniform and state calibrated requirements) for determining whether a state-level regulatory regime is “substantially similar” to the Federal regulatory framework. This would require a state-level regulatory regime to “meet or exceed” the standards and requirements of Section 4(a).

A “uniform requirement” is defined as a requirement that is applicable to a state qualified payment stablecoin issuer and where the Act does not grant substantive discretion to a state payment stablecoin regulator. In order for a state-level regulatory regime to be found to be “substantially similar” to the Federal regulatory framework, each of the uniform requirements found listed in Appendix A must be fully adopted without substantive changes.

A “state calibrated requirement” is defined as a requirement under Section 4(a) of the Act that is applicable to a state qualified payment stablecoin issuer and for which the Act grants a state discretion with regard to how it wants to implement state-calibrated requirements. Even so, the state-level regulatory regime must be found by the Stablecoin Certification Review Committee to “meet or exceed” the applicable standards/requirements and be substantially similar to the Federal regulatory framework.

In practice, this means that the state must implement a “uniform requirement” without any material change. However, state regulators will have discretion in how they chose to implement state calibrated requirements.

Comments Requested

The Bureau is seeking feedback on all aspects of the proposal. However, they have specifically posed a number of questions throughout the document pertaining to the following topics:

  • Scope, Applicability and Definitions
  • Broad Based Principals for State Calibrated Requirements
  • Broad Based Principals for Uniform Requirements  
  • Substantial Similarity/Meet or Exceeds Standards and Requirements
  • Questions re: other Section of the Act
  • Deviations in Form or Procedure
  • Reserve Assets
  • Redemption
  • Rehypothecation
  • Monthly Report Certifications
  • Capital
  • Liquidity, Reserve Asset Diversification, and Interest Rate Risk Management
  • Operational, Compliance and Information Technology Risk Management
  • Applications and Licensing
  • Supervision and Enforcement
  • Custody
  • Insolvency
  • Additional State Requirements

NASCUS Proposed Rule Summary
NCUA Rules & Regulations 12 CFR Part 708a Subpart C: Merger of Insured Credit Unions into Banks

April 2026
As part of its tenth wave of the “Deregulation Project,” NCUA is proposing to amend its regulations governing the merger of insured credit unions into banks, consistent with the February 2026 proposal to amend 12 CFR Part 708a, Subpart A, which governs the conversion of insured credit unions to mutual savings banks, by eliminating prescriptive requirements related to disclosures, communications, procedures, and formatting to provide credit unions greater flexibility to exercise fiduciary duties and business judgment while maintaining core member notice and protection objectives.

The proposal would apply to all federally insured credit unions, including Federally Insured State-Chartered Credit Unions (FISCUs). NCUA states the proposal does not change the fundamental member notice or impose new requirements on state-chartered credit unions or regulatory agencies. 

The proposal may be read in its entirety here: Bank Conversions and Mergers.

Comments are due to NCUA by June 22, 2026.

Background and Proposed Changes

The NCUA Board has proposed amendments to 12 CFR Part 708a, Subpart C, which governs mergers of insured credit unions into banks. The proposal would remove various procedural, disclosure, and communication requirements that the Board views as overly prescriptive, with the stated goal of reducing regulatory burden, lowering administrative costs, and providing credit unions greater flexibility to exercise business judgment while maintaining appropriate member protections.

The proposal would make several changes:

  • Remove the duplicative definition of “clear and conspicuous,” which currently includes prescriptive formatting requirements such as bold type and minimum font size.
  • Revise the pre-board-vote notice requirements by removing the requirement to publish notice in a general circulation newspaper and instead requiring notice on the credit union’s home banking landing page, if applicable.
  • Revise due diligence reporting by removing the requirement to describe how the board located the merger partner and negotiated the merger agreement in its submission to the NCUA.
  • Remove prescriptive member disclosure formatting requirements, including the requirement that certain text appear in a box on a single, otherwise blank sheet of paper.
  • Remove Part 708a.312, “Voting guidelines,” in its entirety. NCUA characterizes this section as non-binding guidance rather than mandatory requirements.

Key Considerations:

  • Member communication remains central within the proposal.  NCUA is not eliminating notice or disclosure expectations but as with other proposals, is allowing more flexibility in how information is communicated to members.
  • The proposal reflects a broader shift toward board discretion and fiduciary responsibility, reducing reliance on prescriptive regulatory requirements.
  • While the proposal removes certain requirements, it maintains core expectations around member notice and informed decision making, aligning with the broader deregulatory effort to reduce overly burdensome requirements while preserving member protections.

NASCUS Summary: FinCEN & Federal Banking Agencies Proposed Rule for AML/CFT Reform
April 2026

On April 7, 2026, FinCEN issued a proposed rule to fundamentally reform financial institutions’ anti-money laundering and countering the financing of terrorism (AML/CFT) programs under the Bank Secrecy Act (BSA). The proposal is intended to shift regulatory expectations toward more risk-based, effective programs, emphasizing how institutions identify and mitigate illicit finance risks.

The proposal may be read in its entirety here: AML/CFT Reform.
Note: This proposal supersedes FinCEN’s 2024 proposed rule, which has been withdrawn.

Concurrently, the federal banking agencies, including NCUA, issued a companion proposed rule to incorporate the proposed changes into their respective regulatory frameworks to align supervisory expectations with FinCEN’s proposal and ensure consistency across regulators and institutions.

The NCUA proposal may be read in its entirety here: NCUA AML/CFT Reform

Comments for both proposals are due by June 9, 2026.

Background and Proposed Changes

FinCEN’s AML/CFT program requirements have historically been implemented through a framework that, in practice, has often been viewed as prescriptive, and checklist focused.  In 2024, FinCEN issued a proposed rule to reform these requirements but later withdrew the proposal following industry feedback.  This new proposal reflects a revised approach by FinCEN intended to emphasize effectiveness, risk-based outcomes, and clearer alignment between regulatory requirements and supervisory practices.

In June 2025, Treasury identified guiding principles for BSA reform, recognizing an urgent need to modernize AML/CFT within the United States that would be “effective, risk-based, and focused on the greatest threats to financial institutions and national security.”  Treasury’s vision centers on a regime where financial institutions:

  • Maintain reasonably designed, risk-based AML/CFT programs that comply with laws and regulations.
  • Direct more resources to higher-risk areas rather than to lower risk areas.
  • Generate highly useful information for law enforcement and national security agencies in priority areas defined by Treasury.

Building upon the above, the proposal restructures AML/CFT program requirements around two core obligations for financial institutions in that they must establish and maintain a reasonably designed and effective program:

  • Establish focuses on program design, including the development of policies, procedures, and controls that are tailored to the institution’s risk profile.
  • Maintain focuses on the ongoing implementation, effectiveness, and the ability for an institution to identify, address, and remediate deficiencies over time.

This distinction is intended to create a clearer framework for evaluating whether issues stem from program design or execution to differentiate between program structural weaknesses and breakdowns in its implementation.

The proposal generally maintains the existing pillar-based structure of AML/CFT programs, largely restating current expectations while incorporating limited updates:

  • Internal Controls – Requires that institutions implement policies, procedures, and controls that are risk-based and reasonably designed to manage identified illicit finance risks.
  • Independent Testing – Maintains the requirement for independent testing of the AML/CFT program, with an emphasis on evaluating the overall effectiveness of the program.
    • The proposal clarifies that independent testing may be conducted by internal or external parties, provided they are independent from the AML/CFT program and not involved in the design, operation, or oversight in a manner that would create a conflict of interest.
  • BSA/AML Officer – Continues to require the designation of a qualified individual responsible for program oversight and implementation.
    • The proposal adds a new requirement that the AML/CFT officer be located in the United States and accessible to regulators, strengthening expectations around direct regulatory access and accountability.
  • Training – Requires ongoing training programs that are risk-based, role-specific, and aligned to the institution’s products, services, and risk exposure.
  • Customer Due Diligence – Remains a core component of the program but is being formally integrated into the broader framework (e.g., internal controls) and is being eliminated as a standalone pillar.

The rule also reinforces and formalizes risk assessment expectations for institutions to identify, assess, and periodically update their risk profiles, which serve as the foundation for a reasonably designed AML/CFT program.

In addition, the proposal introduces a new supervisory and enforcement framework that would increase FinCEN’s involvement in significant AML/CFT supervisory actions.  Under this framework, federal banking agencies, including NCUA, would be required to provide FinCEN with advance notice and an opportunity to review and comment on certain significant supervisory or enforcement actions.

Key Considerations

  • For credit unions, the practical impact of this proposal will depend largely on how NCUA incorporates these changes into Part 748, making the companion rulemaking equally important in assessing operational requirements.
  • How will the introduction of a formal consultation framework requiring federal banking agencies, including NCUA, to provide advance notice to FinCEN impact the timing, coordination, and consistency of significant AML/CFT supervisory and enforcement actions?
  • The proposal is intended to provide flexibility, but key concepts of the rule such as “effective,” “reasonably designed,” and “significant” are subjective, creating potential for variability in supervisory interpretation.
    • This seems likely to be a key focus area when it comes to comment letters from institutions.
  • The proposal’s emphasis on risk assessments is likely to require institutions to move toward more dynamic, continuously updated processes, rather than the more static, point-in-time assessments commonly maintained today.
  • The proposal represents a notable shift in regulatory philosophy, focusing on whether an AML/CFT program is “reasonably designed” and effective
  • By separating the obligations to “establish” and “maintain” a program it introduces a more structured framework for evaluation and discovery of potential deficiencies.

NASCUS Proposed Rule Summary
NCUA Rules & Regulations 12 CFR Part 701 Appendix B: Chartering and Field of Membership

April 2026
As part of its ninth wave of the “Deregulation Project” NCUA is proposing to amend the associational common bond provisions of its chartering and field of membership (FOM) rules.

The proposed rule changes apply only to Federal Credit Unions (FCUs). The proposal appears to expand the interpretation of the associational bond by potentially allowing eligibility where access to products or services is a condition of membership; currently that is an automatic disqualification. Although it appears minor, this could potentially further extend the reach of the federal charter and intensify existing competitive disparities on state-chartered credit unions that are already navigating ongoing FOM constraints.

The proposal may be read in its entirety here: Chartering and Field of Membership.

Comments are due to NCUA by June 8, 2026.

Proposed Change

The NCUA Board has proposed an amendment to the associational common bond provisions within its chartering and FOM rules, incorporated as Appendix B to Part 701. 

Currently, an association that requires the purchase of a product or service as a condition of membership can be viewed as automatically disqualified from recognition as a valid associational common bond.

The proposal would remove that automatic bar and clarify that these groups may still qualify if the client-customer relationship is only incidental related to overall activities and circumstances. The proposal states: the…relationship may be supportive or supplementary to the associational group’s activities and common bond, but it cannot be the core reason for its existence.

The Board states that the goal of the change is intended to create better alignment with the Federal Credit Union Act (FCU Act) by centering core principles of membership and eliminating a bar that goes beyond requirements of the FCU Act.

Key Considerations:

  • Applies only to FCUs. The proposal does not apply to state-chartered credit unions.
  • The proposed change only affects requirements related to associational common bonds. It does not affect occupational common bond charters or community charters.

NASCUS Proposed Rule Summary:
NCUA Rules & Regulations 12 CFR Part 701.21(h) and Part 741.203(c)—Third-Party Servicing of Indirect Vehicle Loans

March 2026
As part of its eighth wave of the “Deregulation Project,” NCUA is proposing to remove Parts 701.21(h) and Part 741.203(c), stating that the regulation governing third-party servicing of indirect vehicle loans is unnecessarily prescriptive.  

The proposed rule applies to all Federally Insured Credit Unions (FICUs) and may be read in its entirety here: Third-Party Servicing of Indirect Vehicle Loans.

Comments are due to NCUA by May 26, 2026.

Summary

Part 701.21 of NCUA’s regulations governs loans to members and lines of credit for Federal Credit Unions (FCUs), including specific limitations on indirect lending arrangements where a third-party services vehicle loans. Part 741.203(c) extends FCU loan requirements in Part 701.21(h) to Federally Insured State Chartered Credit Unions (FISCUs).

Part 701.21(h) limits the aggregate amount of indirect vehicle loans serviced by any one third-party servicer to:

  • 50 percent of a credit union’s net worth for the first 30 months, and
  • 100 percent of net worth thereafter

The rule also includes provisions related to waiver requests and appeal processes tied to these limits.

The proposal would also make an amendment to Part 746.201(c) by removing the citation to Part 701.21(h)(3), which currently identifies the appeal right tied to waiver determinations under the existing rule.

The Board is proposing to remove Part 701.21(h) and Part 741.203(c) in their entirety, eliminating these concentration limits and associated administrative requirements.

Why?

NCUA states the current rule is overly prescriptive and unnecessary, as it imposes arbitrary, inflexible, concentration limits that may not align with a credit union’s individual risk profile. The Board indicates that risks associated with indirect lending and third-party relationships can be more effectively addressed through supervisory processes, including examinations and risk-based oversight, and board developed policies that are appropriately scaled to a credit union’s activities, rather than through fixed regulatory caps.

Key Considerations:

  • The proposal removes specific regulatory concentration limits but does not eliminate the underlying risks associated with indirect lending or third-party servicing. Credit unions will remain responsible for managing these risks through internal controls, due diligence, and board-approved policies.
  • The removal of Part 741.203(c) is particularly relevant for FISCUs, as it eliminates a federally imposed limitation and allows greater reliance on applicable state law and supervisory frameworks.
  • Credit unions with significant indirect lending programs may experience increased operational flexibility, but also increased expectations from examiners to demonstrate sound risk management practices.
  • The elimination of waiver and appeal requirements reduces administrative burden but removes a formal mechanism previously used to exceed regulatory threshold.

NASCUS Proposed Rule Summary
NCUA Rules & Regulations Part 708a and 708b

March 2026
As part of its “Deregulation Project”, NCUA is proposing to amend Part 708a governing conversion of federally insured credit unions (FICUs) into banks and Part 708b governing voluntary termination of share insurance.. The NCUA Board proposes to eliminate certain prescriptive procedural, disclosure, and communication requirements.

Parts 708a and 708b apply to federally insured state credit unions by reference in part 741.208.

NCUA’s proposed changes have been issued as two separate requests for comments.
Comments for both are due to NCUA on or before 11:59 p.m. Eastern, April 13, 2026.

  1. You may read the proposed changes to Part 708a here.
  1. You may read the proposed changes to Part 708b here.

Summary of the Proposed Changes

  1. Proposed Changes to Part 708a Bank Conversions of FICUs

NCUA proposes eliminating several sections within subpart A “Conversion of Insured Credit Unions to Mutual Savings Banks”.

  • § 708a.101 – eliminating the definition of “clear and conspicuous”

Part 708a.101 provides the definition for “clear and conspicuous” disclosures. The definition mandates specific formatting, such as bold type and a minimum 12-point font size. NCUA now believes this requirement is “overly prescriptive,” and “unnecessary” and can hinder effective communication. NCUA notes that while the Federal Credit Union Act (FCUA) requires member notice, it is silent on specific formatting.

NCUA proposes eliminating the requirements specifying the bold type and font size, leaving the term “clear and conspicuous” to speak for itself.

  • § 708a.103(a)(1) – eliminating requirement for newspaper notice of the proposed conversion

This provision requires credit unions to post notice of the proposed conversion in the local newspaper. NCUA would eliminate the requirement for publication in a local newspaper. As amended, the provisions would require a credit union to publish a notice in a clear and conspicuous fashion in the lobby of its home and branch offices, on the credit union’s website, and a member’s home banking landing page, if it has one. If the notice is not on the home page of the website, the home page must have a clear and conspicuous link to the notice, visible on a standard monitor without scrolling, to the notice. These notices must be published no later than 30 days before a board of directors votes on a proposal to convert.

  • § 708a.104 – elimination of prescriptive requirements for post conversion vote disclosures

Part 708a.104 governs disclosures and communications to members following the credit union board of director vote on a proposed conversion. Many of these requirements are detailed typographical requirements or extended definitions of terms such as “simple and easy to understand.” NCUA is proposing:

  • Elimination of the Subparagraph (d)(2) requirements that the text appear in a box, on the front side of a page, on a single piece of paper, instructions on how the notice is folded into a cover letter and whether the back side of the notice must be blank.
  • Simplifying the requirement of Subparagraph (e) requiring communications to be written “in a manner that is simple and easy to understand. Simple and easy to understand means the communications are written in plain language . . .”             NCUA proposes deleting the last sentence of the provision that provides detailed examples of what “easy to understand” and “plain language” including that credit unions use short explanatory sentences; use of definite, concrete, and use of everyday words, among others.
  • § 708a.104(f)(5) & f(8) eliminating requirement for credit unions to submit member-to-member communications to the Regional Director if the credit union believes the communications are improper

Part 708a requires credit unions to facilitate a member’s desire to communicate with other members regarding a proposal to convert to mutual savings bank. Pursuant to the rules, the member submits the communication to the credit union for distribution to the other members. If the credit union believes the communication to be improper, pursuant to § 708a.104(f)(5) it must submit the communication to the Regional Director within 7 days for review.

NCUA would remove § 708a.104(f)(5) regarding submission of member materials to the Regional Director within 7 days of receipt of the member request if the credit union believes the member request to be improper. If finalized, credit unions would have the discretion to determine with a member communication related to a proposed conversion was proper.

If a credit union posts information on the planned conversion on its website, Subparagraph (f)(8) requires space on the website be made available to members to communicate regarding the proposed conversion. NCUA proposes eliminating the requirement to submit proposed website communications the credit union feels are improper to the RD.  

  • § 708a.113 – elimination of Non-Regulatory Guidance in Conversions

Part 708a.113 contains non-binding guidelines intended to help credit unions conduct a “fair and legal vote.” It offers advice on matters such as the applicability of state law, determining voter eligibility, and scheduling meetings. NCUA seeks comments on whether the guidelines should be re-issued as guidance or are unnecessary.

  1. Proposed Changes to Part 708b Mergers and Termination of Share Insurance

The Board is proposing targeted amendments to its regulations at §§ 708b.106(d) and (e), 708b.206(b)(2), and 708b.206(c)(2), which govern member-to-member communications and share insurance communications to streamline requirements while maintaining essential member protections.

  • § 708b.106 – elimination of NCUA’s merger website for member-to-member communication

Section 708b.106(d) allows for members to submit information related to a proposed merger for publication on an NCUA website. Section 708b.106(e) establishes criteria for comments to be published. NCUA believes notice to members of the proposed merger, and the provision of information upon which to make an informed decision on how to vote, are achieved through the provisions of paragraphs (a) through (c) of the section which describe when and what information must be provided by the credit union to its members. As NASCUS has long pointed out, it seems few members make use of the NCUA website for mergers: NCUA notes in 2024, only 34 of the 143 mergers received a comment. 

  • § 708b.206

To ensure members receive clear and accurate information regarding termination of federal share insurance, Sections 708b.206(b) and (c) mandate that every communication concerning an insurance conversion or termination must contain a conspicuous statement informing members that their accounts are insured by the NCUA, backed by the full faith and credit of the government, and that if the credit union converts to private insurance or terminates its federal insurance and then fails, the federal government does not guarantee the member will get their money back. The regulations require this disclosure to be prominent, mandating that it appear on the first page of the communication and be printed in capital letters, bolded, offset by a border, and in a font size at least one size larger than other text.

NCUA proposes eliminating § 708b.206(b)(2) and § 708b.206(c)(2), provisions requiring communications about share insurance or termination of federal share insurance to be printed in capital letters, bolded, offset by a border, and in a font size at least one size larger than other text.

In addition to soliciting comments on the proposed changes, NCUA seeks feedback on whether the remaining requirements for the disclosures to be “conspicuous” and appear on the first page of a communication where conversion is discussed are sufficient to ensure members receive prominent and effective notice regarding the termination of federal insurance.