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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.

NASCUS Proposed Rule Summary
NCUA Rules & Regulations 12 CFR Part 701.4(b)(3): Post Election Training for New Board Members

February 2026
As part of its sixth wave of the “Deregulation Project” NCUA is proposing to remove its rule which currently requires each Federal Credit Union (FCU) director to have a working familiarity with basic finance and accounting practices after appointment within a reasonable time, not exceeding six months.

The proposed rule applies only to Federal Credit Unions (FCUs) and does not apply to Federally Insured State Credit Unions (FISCUs). The proposal may be read in its entirety here: Post Election Training for New Board Members.

Comments are due to NCUA by April 27, 2026.

Background and Proposed Change

In a final rule published on December 28, 2010 the NCUA Board established Part 701.4 to document and clarify the fiduciary duties and responsibilities of FCU directors. The regulations intent was to address concerns about director accountability and to reinforce that directors act in the best interests of the FCU and its membership.

Part 701.4(b)(3) currently requires newly elected or appointed FCU directors to obtain, within a reasonable period not to exceed six months, at least a working familiarity with basic finance and accounting practices. This includes the ability to read and understand the credit union’s balance sheet and income statement and to ask substantive questions of management and auditors.

NCUA states that while director competency remains important, the Board believes members are best positioned to elect qualified individuals and the agency believes the prescriptive six-month requirement is unnecessary to maintain regulation. As part of its ongoing Deregulation Project, the Board is proposing to remove the prescriptive training requirement from regulation.

Key Considerations:

  • Removes the six-month director training requirement. FCUs would no longer be subject to a specific regulatory mandate requiring newly elected or appointed directors to attain a working familiarity with basic finance and accounting within a defined timeframe.
  • No change to overall board oversight expectations. NCUA will continue to evaluate board competency and governance through the examination process and supervisory framework.
  • Applies only to FCUs. The proposal does not apply to Federally Insured State Credit Unions (FISCUs).

NASCUS Proposed Rule Summary
NCUA Rules & Regulations 12 CFR Part 701.21 (c)(8): Loan Compensation/Commission

February 2026
As part of its sixth wave of the “Deregulation Project” NCUA is proposing to amend 12 CFR Part 701.21 (c)(8) to clarify requirements related to loan compensation and incentive arrangements. The proposal would add a definition of “overall financial performance” and clarify that the exception for compensation based on overall financial performance includes senior management employees.

The proposed rule applies to all Federally Insured Credit Unions (FICUs) through incorporation in Part 741.203(a) and may be read in its entirety here: Loan Compensation/Commission.

Comments are due to NCUA by April 27, 2026.

Background and Proposed Change

Part 701.21(c)(8) restricts compensation arrangements in connection with loan originations. The provision generally prohibits a FICU official or employee, or an immediate family member of either, from directly or indirectly receiving any commission, fee, or other compensation in connection with any loan made by their FICU. The regulation was originally adopted to address safety and soundness concerns and to reduce incentives that could encourage inappropriate lending practices.

The rule includes exceptions allowing certain types of compensation arrangements. These include:

  • Payment of salary to employees;
  • Incentive or bonus compensation based on the credit union’s overall financial performance;
  • Incentive or bonus compensation tied to loan originations for employees other than senior management, provided the board establishes written policies, internal controls, and ongoing monitoring at least annually; and
  • Compensation received from outside parties for activities performed outside the credit union by volunteer officials, non-senior-management employees, or immediate family members of volunteer official or employee, provided the arrangement does not involve referrals from the credit union.

While the rule provides an exception for incentive or bonus compensation based on a credit union’s “overall financial performance,” the regulation does not currently define “overall financial performance.” This has led to questions regarding how lending-related performance metrics may be incorporated into compensation plans. NCUA is proposing to add a principles-based definition of “overall financial performance” as a quantifiable metric or set of metrics, set by a credit union’s board of directors, used to measure achievement of targeted performance goals, which may include, but are not limited to, lending-related goals and metrics. Metric selection will be left to each credit union to allow flexibility to align compensation with organizational goals and market demands.

NCUA’s proposed definition of “overall financial performance” would be:

Overall financial performance means a quantifiable metric or set of metrics, set by a credit union’s board of directors, used to measure a credit union’s achievement of targeted performance goals. No compensation plan may permit any unsafe or unsound practice or any unsafe or unsound reliance on individual metrics which may include, but not be limited to, lending-related goals and metrics. No compensation plan may permit compensation in conflict with other applicable laws.

NCUA also proposes revising the regulatory text to expressly state that the overall financial performance exception applies to all employees, including senior management employees.

Key Considerations:

  • The proposal would define “overall financial performance,” providing regulatory clarity regarding how incentive compensation tied to lending metrics may be structured when based on organizational performance goals.
  • The proposal would amend § 701.21(c)(8)(iii)(B) to include senior management employees within the exception for compensation based on overall financial performance.
  • The proposal emphasizes that compensation programs tied to overall financial performance must continue to operate in a safe and sound manner.

NASCUS Proposed Rule Summary
NCUA Rules & Regulations 12 CFR 701.26 Credit Union Service Contracts

February 2026
As part of its sixth wave of the “Deregulation Project” NCUA is proposing to remove 12 CFR 701.26 which governs the organization and operation of Federal Credit Unions’ (FCUs) authority to enter into contracts for assets or services related to daily operations.  

The proposed rule applies only to FCUs and does not apply to Federally Insured State Credit Unions (FISCUs). The proposal may be read in its entirety here: Credit Union Service Contracts.

Comments are due to NCUA by April 27, 2026.                   

Background and Proposed Change

NCUA originally issued rules related to FCU service contracts in the 1970s, with the current framework consolidated into Part 701.26 in 1982. The regulation has remained largely unchanged since a 1998 amendment removed a provision treating advance payments to a vendor for more than three months of service as an investment in a credit union service organization.

Part 701.26 currently governs an FCU’s authority to enter into contracts for assets or services related to its daily operations, including agreements with third-party vendors and other organizations. The regulation also permits one FCU to represent one or more other credit unions or organizations in contractual arrangements with a third party and authorizes the sharing of fixed assets. It does not grant FCUs the authority to provide services directly to other credit unions but provides authority to contract for assets and services that may be offered through a shared service arrangement.

Part 701.26 currently requires that all covered agreements be in writing and advise all parties that the goods and services provided are subject to NCUA examination to the extent permitted by law.

The Board is proposing to remove Part 701.26 in its entirety, stating that FCU authority to enter into contracts for operational services is inherent in its charter and general powers under the FCU Act. The Board considers the regulation superfluous, as the requirement that such agreements be in writing is a standard business practice that exists regardless of whether it is referenced in regulations. The Board also notes that the examination notice provision is unnecessary, as NCUA’s examination authority is generally limited to the products, services, and operations of the credit union rather than its vendors.

Key Considerations

  • The proposal would rescind Part 701.26 in its entirety.
  • The Board continues to expect FCUs to adhere to standard business practices and maintain safe and sound practices regarding third-party contracts, including that all contracts be in writing.
  • The proposal states the Board is interested in comments on all aspects of the proposed rule. Additionally, the Board is asking for comments on:
    • Whether part 721 should be amended to reflect FCU representative authority in joint operations and resource sharing situations (the Board has indicated it may amend part 721 when finalizing this rule if it determines an amendment is necessary for clarity).
  • Applies only to FCUs. The proposal does not apply to FISCUs.