(Jan. 15, 2021) The state system has a new, direct contact on the NCUA Board: Vice Chairman Kyle Hauptman, who was named board liaison to NASCUS and another credit union group this week by Chairman Rodney Hood.
In a release, the agency said Hauptman’s responsibilities as liaison to the state system (and to the Defense Credit Union Council, a Washington-based group representing defense-based credit unions) would include meeting with both groups and reporting on priorities and recommendations to the NCUA Board. Hood noted that the Federal Credit Union Act empowers him, as NCUA Chairman, to determine each board member’s area of responsibility.
Hauptman said, in the release, that he is looking forward to working with NASCUS “as it will provide me with a broader understanding of the credit union landscape.”
NASCUS’ Lucy Ito, in a press statement of her own, congratulated Hauptman and added that the state system is fully ready and willing to interact with him to achieve his stated goal of developing a broader understanding of credit unions, particularly the role of the dual chartering system. “NASCUS shares the belief that a strong, equal partnership between NCUA and the state credit union system will help ensure a vibrant and mutually reinforcing dual charter system – which we also believe makes for a stronger, more resilient and long-lasting credit union system overall,” she said.
LINKS:
Hauptman Named NCUA Liaison to DCUC and NASCUS
(Jan. 15, 2021) Improving coordination between NCUA and CFPB over the consumer protection supervision of credit unions with more than $10 billion in assets is the stated purpose of a “memorandum of understanding” announced by the two agencies Thursday.
In a joint release, the two agencies said that under the agreement they will “pursue opportunities to proactively and efficiently share supervisory information, including drafts of Covered Reports of Examination and final Reports of Examination for credit unions” with more than $10 billion dollars in assets. The agencies said they would use “secure, two-way electronic means” to accomplish that and that they will “jointly collaborate in semi-annual strategy planning sessions to identify and address areas of alignment and coordination in examinations for covered institutions.”
CFPB and NCUA also asserted that the agreement would “better facilitate coordinated examinations” to increase efficiency, and that the two agencies would share information on training activities and content, as well as on supervisory activities and potential enforcement actions.
(Jan. 15, 2021) Applications for appointments to membership on one of four advisory committees that offer input from various sections of the financial industry, and for research projects by the agency, to the CFPB are now being taken, the bureau said this week. New members, selected through the application process, are expected to be announced in late summer, according CFPB.
Applications for membership in the bureau’s Credit Union Advisory Council (CUAC), Consumer Advisory Board (CAB), Community Bank Advisory Council (CBAC), and Academic Research Council (ARC). According to the bureau, membership in the committees includes representatives of consumers, diverse communities, the financial services industry, academics, and economists.
Qualification for membership goes beyond experts in the industry to those who have been affected by events or decisions of the industry, according to the notice. It states that membership is also open to “representatives of communities that have been significantly impacted by higher-priced mortgage loans, and seek representation of the interests of covered persons and consumers, without regard to party affiliation.”
Appointments to the committees are generally for two years.
The eight-person CUAC now includes executives of two NASCUS member credit unions (Brian Holst of Elevations Credit Union and Jeremiah Kossen of Town & Country Credit Union) and executives from three additional state-chartered credit unions (Racardo McLaughlin of TwinStar Credit Union, Monica Davis of Union Square Credit Union), Doe Gregerson of Landmark Credit Union).
LINK:
Applications open for advisory committee appointments
Bios, additional information of current CUAC members
(Jan. 15, 2021) Mark your calendars for four upcoming events from NASCUS in the months ahead – including the week after next.
- Jan. 25: NASCUS sponsors a webinar (for members only) outlining the Solar Winds/Orion security breach (by Russian actors), and its impact on the state system (both regulators and credit unions). The 90-minute session will take an in-depth look at the security breach, which was originally estimated to have affected about 18,0000 customers of the Solar Winds firm, and its Orion product – including a number of big federal agencies (such as the Treasury Department). There is no cost for the event, but it is open to members only.
- March 16: The Wisconsin Department of Financial Institutions, the Wisconsin Credit Union League and NASCUS team up to provide this annual session that looks at national and state issues (including the impact of COVID-19), duties, liabilities and protections of credit union directors, and succession and strategic planning. This is a virtual session that runs from 9 a.m. to noon (central time).
- March 17-18: NASCUS National Meeting (for state regulators only). This virtual meeting looks at the latest issues facing supervision and regulation of the state system, while also offering state regulators a forum where they can share ideas, discuss common issues, and uncover trends. The event this year will be virtual; registration is open only to state regulators.
- Summer: NASCUS Cybersecurity Conference with CUNA is scheduled to be held (with the precise date/time to be announced at a later time). The event has become the premier cybersecurity event within the credit union system, looking at the latest developments, trends and techniques for ensuring security of credit union systems. Like many other events in 2021, the cybersecurity conference will be held virtually.
For more information on any of these events, see the link below.
LINK:
NASCUS 2021 ‘Upcoming Events’
(Jan. 15, 2021) Florida (and NASCUS) welcome a new state-chartered credit union this week: Radiant CU of Gainesville (formerly SunState FCU). The 64-year-old credit union holds $570 million in assets and counts about 40,000 members … Melissa M. Lowden will be NCUA’s next deputy chief financial officer, effective Jan. 17, the agency said this week. In a release, the agency said Lowden – who joined NCUA in 2015 – will oversee accounting and financial reporting, enterprise risk management, strategic and performance planning, budgeting, procurement, facilities and logistical support, the administration of credit union operating fees, and the National Credit Union Share Insurance Fund’s (NCUSIF) capitalization deposits and investments … Brian Brooks, the acting comptroller of the currency, on Thursday resigned from the agency; Blake Paulson, formerly senior deputy comptroller and chief operating officer at the Office of the Comptroller of the Currency (OCC) was named his successor in accordance with federal statute.
LINK:
Lowden Named Deputy Chief Financial Officer
(Jan. 8, 2021) Nine items – including a proposal on risk-based net worth (complex threshold), an advance notice of proposed rulemaking on simplification of risk based capital requirements and four other final or proposed rules – are all on the NCUA Board’s agenda for Thursday’s open meeting, which gets underway at 10 a.m. ET.
The other action items on the board’s open meeting agenda include: a proposed rule (part 712), on credit union service organizations (CUSOs); a final rule (and a board briefing) on statutory adjustment of civil money penalties (CMPs, part 747); a final rule (part 704), corporate credit unions; and a notice of proposed rulemaking (parts 700, 701, 703, 704 and 713), CAMELS rating system.
The meeting could also possibly be the last chaired by Rodney Hood, a Republican appointee. President-elect Joe Biden, once he is inaugurated Jan. 20, is expected to name Todd Harper, a Democrat appointee, chairman shortly after taking office.
Rulemaking for risk-based net worth and capital requirements has been on the board’s action item list since at least 2014. That year, the board first issued its risk-based capital proposal for “complex” credit unions – then defined as those with more than $100 million in assets – with implementation slated 18 months after the rule would have been finalized. A revised proposed rule was issued in 2015 and finalized that October with an effective date of Jan. 1, 2019.
That final rule was intended to replace the then- (and still now) effective risk-based net worth ratio with a new risk-based capital ratio for federally insured credit unions, which NCUA called comparable to the regulatory risk-based capital measures used by the federal banking agencies: the Federal Deposit Insurance Corp. (FDIC), Federal Reserve, and Office of the Comptroller of Currency (OCC).
But in 2018, the board revised its definition of “complex” credit unions to include only those with more than $500 million in assets. It also delayed the rule’s implementation further, to Jan. 1, 2020.
In December 2019, the board delayed the implementation date again, to 2022 (and on a split vote, with Board Member Todd Harper voting no). At that 2019 meeting, NCUA Board Chairman Rodney Hood said delaying the effective date to 2022 woiuld give the agency time to consider new methods for strengthening credit union capital requirements, indicating that then was a good time to do so as credit unions enjoy strong capital positions.
Also at that meeting, then-NCUA Board Member J. Mark McWatters said the agency was considering “a suite of capital rules,” which would include a proposal for credit unions similar to the community bank leverage ratio (CBLR), adopted by the federal banking agencies in 2019. That rule, he indicated, would exempt credit unions with less than $10 billion in assets from complying with the risk-based capital requirements, if those credit unions meet certain requirements.
Other items on the NCUA Board’s Jan. 14 open meeting agenda include:
- Consideration of the agency’s 2021 annual performance plan;
- Board briefing on the agency’s “Advancing Communities through Credit, Education, Stability and Support” (ACCESS) initiative;
- Board briefing on December’s Consolidated Appropriations Act, 2021 (the COVID-19 relief bill).
Following the board’s public meeting will be its closed (non-public) meeting, featuring six items – which include two supervisory actions, two personnel actions, a delegation of authority and a board briefing.
LINK:
NCUA Board meeting agenda, Jan. 14
(Jan. 8, 2021) NCUA’s communications methods are up for comment in an effort, the agency said this week, to “promote efficiency and increase transparency.”
In a release, NCUA said it is seeking public input through a “request for information” (RFI) on how it can streamline and improve its communications with its stakeholders. Specifically, the agency said, the request for information “seeks public input on how the agency can maximize efficiency and minimize burdens associated with obtaining information on federal laws, regulations, policies, guidance, and other materials relevant to federally insured credit unions.”
The RFI, the agency said, contains questions about the effectiveness of its press releases, social media content, and the timing and frequency of agency communications. There are also questions related to improving the agency’s websites, online data resources, and the delivery and format of supervisory guidance, NCUA said.
“Outdated or duplicative regulatory and supervisory information adds to the overall regulatory burden of credit unions as they must devote time and resources to sorting through this information,” NCUA Chairman Rodney E. Hood said in the release. “We recognize that the amount of information the NCUA provides to credit unions can create challenges and may impose unintended burdens. This request for information addresses this concern and continues my mission to ensure NCUA’s regulation of credit unions is effective, not excessive.”
Comments will be taken for 60 days following publication of the RFI in the Federal Register.
LINK:
Request for Information on NCUA Communications and Transparency
(Jan. 8, 2021) A number of provisions contained in the massive appropriations and coronavirus relief legislation signed into law Dec. 27 are highlighted by NCUA in a letter to credit unions sent this week.
That letter came on the heels of two other letters issued recently by the agency, addressed to federal credit unions only, but with some interest to the state system.
In its letter to credit unions 21-CU-01, NCUA notes that most of the provisions of the COVID-19 relief bill extend portions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law in March as the impact of the coronavirus crisis became apparent. The provisions are extended to Dec. 31, 2021.
More specifically, NCUA said the provisions in December’s Consolidated Appropriations Act directly affecting credit unions and their members include:
- Extending provisions affecting the agency’s Central Liquidity Facility (CLF, which makes loans to credit unions and the National Credit Union Share Insurance Fund (NCUSIF)) to Dec. 31, 2021. Those include: an increase in the facility’s borrowing capacity (allowing it to borrow $16 (up from $12) for every $1 in capital and surplus; relaxed requirements for agent membership (making it more economical for corporate credit unions to join the facility); and extension of liquidity help directly to corporates.
- Suspending the requirement to categorize certain loan modifications related to the COVID-19 pandemic as troubled debt restructurings (TDRs) through Jan. 2, 2022.
- Lengthening the time for compliance with the Current Expected Credit Loss (CECL) accounting standard through Jan. 1, 2022 (although federally insured credit unions, the agency notes, are not required to comply with CECL accounting standards until Jan. 1, 2023).
- Authorizing an additional $284.5 billion of more easily forgivable loans through the Paycheck Protection Program (PPP). In addition, the December bill sets aside funding for loans by specific institutions: not less than $15 billion for loans by community development financial institutions and minority depository institutions (CDFIs and MDIs), and not less than $15 billion from loans by financial institutions with assets less than $10 billion.
The agency also highlighted provisions in the bill allowing for $1.5 million for its Community Development Revolving Loan Fund (CDRLF) until Sept. 30, 2022; and $12 billion in COVID-19 relief funding for CDFIs that predominantly serve minority communities – with a third of that set aside for smaller financial institutions with less than $2 billion in assets.
Also this week., the agency sent a letter to FCUs (21-FCU-02) pointing out that April 15 is the due date for adjustments to 1% deposits in the NCUSIF, and FCU operating fees. The letter also notes that the overhead transfer rate (OTR, the rate at which funds are transferred from the NCUSIF to the agency’s operating budget to cover “insurance related costs”), increased to 62.3% for 2021, up 100 basis points from 2020 (at 61.3%). “This change results in a reduction to the estimated 2021 operating fee revenue compared to the 2020 operating fee collections,” the agency noted. The 2020 FCU operating fee dropped by an average of 19.6% from the previous year, NCUA said.
Finally, in letter 21-FCU-01, the agency provided updated guidance and templates which it said are intended to assist FCUs seeking to convert to a community field of membership or expand their existing community field of membership. The agency said the letter reflects a number of revisions to its chartering and field of membership manual.
LINKS:
NCUA letter to credit unions 21-CU-01: Summary of the Consolidated Appropriations Act, 2021
NCUA Letter to Federal Credit Unions (21-FCU-02) Operating Fee Schedule Adjusted for 2021
NCUA Letter to Federal Credit Unions (21-FCU-01) Community Charter Conversions and Expansions
(Jan. 8, 2021) NASCUS supports NCUA’s proposed derivatives rule, but has made two recommendations to the agency that the association said would make the proposal more flexible for the needs of the state credit union system.
In the letter filed Dec. 28, NASCUS noted that the proposal would continue to defer to state law for federally insured state credit union (FISCU) derivatives authority, and adjust the timeframe for FISCUs to notify NCUA of derivatives activity. The proposal was issued by the NCUA Board Oct. 15. It is designed, the agency said then, to make the agency regulations over derivatives less prescriptive and more principles-based – and expand federal credit unions’ (FCUs) authority to purchase and use derivatives as part of their interest-rate risk (IRR) management.
For the state system, a key part of the proposal (as NASCUS noted in its letter) is continued recognition by NCUA of the primacy of state law in determining investment authority for FISCUs. The association made two recommendations for improving the proposal by, NASCUS said, enhancing coordination between NCUA and state supervisory authorities (SSAs).
First, NASCUS said the agency should eliminate redundant supervisory notice requirements where applicable. The agency, NASCUS wrote, should provide an exemption from its notice requirement for FISCUs in states where pre-approval or pre-notification is required to be given to the state regulator.
NASCUS cited the examples of Georgia and Connecticut as states where prior approval from the state regulator is required. “Exempting FISCUs in states where the state regulator is willing to provide notification to NCUA on behalf of FISCUs eliminates redundancy, streamlines the regulatory framework, provides regulatory relief for credit unions, and reduces the potential for confusion resulting from different state and federal notification timeframes,” NASCUS wrote.
Second, NASCUS recommended that the agency should incorporate exempt derivatives transactions directly into part 741.219 of its rules – the section that covers FISCUS and investment requirements. Specifically, NASCUS “strongly recommended” that — to facilitate FISCU compliance – the agency should incorporate the excluded transactions under the proposal (under part 703.14 of NCUA rules, which only apply to FCUs) directly into a new subpart (d) of section 741.219. Restating the excluded transactions directly in the relevant FISCU rule, NASCUS wrote, “is a better organizational framework that more clearly communicates to FISCUs the required compliance obligations.”
LINK:
NASCUS Comment: Proposed Rule — Derivatives (RIN 3133–AF29)
(Jan. 8, 2021) The state credit union system supports NCUA’s efforts to clarify how it will treat supervisory guidance issued by the agency in the context of examination and supervision, NASCUS said in a comment letter filed with NCUA Monday.
However, NASCUS also urged the agency in the letter to coordinate with state agencies as it implements a final rule, and to consider incorporating definitions of covered guidance into the final rule.
NASCUS was commenting on a proposal issued by NCUA in October aimed at clarifying and codifying the role of supervisory guidance. In doing so, the agency joined with other federal financial institution regulators who had earlier issued the same proposal for the institutions they supervise.
Under the proposal, the meaning of “supervisory guidance” would be clarified as meaning, essentially, it doesn’t have the force of law. If finalized, it would codify an interagency statement issued by all of the agencies in September 2018. That statement was intended to make clear that, unlike a statute or regulation, supervisory guidance is not the same as statute or regulation. “Supervisory guidance does not have the force and effect of law, and the agencies do not take enforcement actions based on supervisory guidance,” the 2018 statement read.
In its comment, NASCUS said the state system supports the proposal, but also made some recommendations, including:
- NCUA should coordinate with state supervisory agencies. Noting that the prevalence of joint examinations and the pilot Alternating Examination Program necessitate NCUA coordinate implementation of this rule with state regulators, NASCUS urged the agency to work with states to ensure a mutual understanding of how NCUA examiners will manage supervision of activities “for which guidance rather than rules form the foundation of supervisory expectations.” NASCUS also urged the agency to ensure state regulators understand how NCUA will incorporate state reliance on state guidance into joint examinations – or in alternating exams where NCUA may be the lead. “NCUA must also communicate to state regulators what, if any, effect state examinations citing state guidance will have on NCUA reliance upon, and acceptance of, state examinations of a federally insured state credit union,” NASCUS added.
- The agency should consider incorporating definitions of covered guidance into a final rule. NASCUS suggested that a final rule would benefit from additional clarification as to what is “supervisory guidance,” noting that the proposal does not contain a formal definition. “It is foreseeable that confusion could arise as to whether existing and future issuances are covered by the rule,” NASCUS wrote. “For example, NCUA Interpretive Rules and Policy Statements (IRPS) are part exempted interpretive rules and covered policy statements. NCUA might consider explicitly identifying existing and future issuances as either covered supervisory guidance or exempt interpretive rule to provide clarity for stakeholders.”
Finally, NASCUS urged the agency to “remain vigilant” to ensure implementation of the proposal (should it become a final rule) does not inadvertently diminish communication of supervisory and regulatory expectations to credit unions.
LINK:
NASCUS comment: Proposed Rule, Role of Supervisory Guidance
(Jan. 8, 2021) Two new summaries – of an NCUA proposal on exemptions for suspicious activity reports (SARs) and exemption thresholds for consumer reporting requirements – have been published by NASCUS.
Both are available to members only.
Late last month, the NCUA Board proposed modifying requirements for federally insured credit unions to file SARs under Bank Secrecy Act (BSA) requirements that would exempt some credit unions which develop “innovative solutions” to meet BSA requirements, when requested.
In its proposal, NCUA suggested that innovative approaches and technological developments in the areas of SAR monitoring, investigation and filings may involve a variety of techniques, including automated form population, automated or limited investigation processes and enhanced monitoring processes
The agency said requests for exemptive relief pertaining to innovation or other matters may involve, among other things, for SARs: expanded investigations and timing issues, disclosures and sharing, continued filings for ongoing activity, outsourcing of responsibilities and practices, as well as the role of agents of FICUs, the use of shared utilities and shared data, and the use and sharing of de-identified data. “The NCUA expects that new technologies will continue to prompt additional innovative approaches related to SAR filing and monitoring,” the agency said.
However, NCUA added, any exemptions it grants would not relieve a credit union from its obligation to comply with Treasury’s Financial Crimes Enforcement Network (FinCEN) SARs regulations, where appropriate.
The second summary looks at a regulatory alert issued by NCUA, also late last month, on annual adjustments for exemption thresholds for 2021 under the Truth in Lending Act (Regulation Z) and the Consumer Leasing Act (Regulation M). The new thresholds (which took effect Jan. 1) are the same as the 2020 thresholds, specifically: for higher price mortgage loans exemption, $27,200; for consumer credit and consumer lease exemptions, $58,300.
LINKS:
NASCUS Summary: NCUA Proposed Rule BSA Part 748
(Jan. 8, 2021) Considering the benefits and costs of preempting state law where conflicts can impede the provision of valuable products and services (such as the regulation of FinTech companies engaged in money transmission) is among the 100 total recommendations from a CFPB taskforce on federal consumer financial law released this week.
The report was issued by the bureau’s Taskforce on Federal Consumer Financial Law after about a year of deliberations. Formed in January 2020, the group was charged with developing recommendations for ways to improve and strengthen consumer financial laws and regulations.
Other recommendations for strengthening consumer laws which touched on states included: Continue to increase dialogue with state regulators to bridge knowledge gaps and streamline regulation, and; authorize CFPB to issue licenses to non-depository institutions that provide lending, money transmission, and payments services.
Additional, general recommendations highlighted by the group included:
- Identify competitive barriers and make appropriate recommendations to policymakers and regulators for expanding access to the payments systems by non-bank providers.
- Identify opportunities to coordinate regulatory efforts. “For example, the Bureau and prudential regulators should eliminate overlapping examination subject areas and reconcile inconsistent examination standards that unnecessarily expend multiple resources and can cause confusion,” the report stated.
- Facilitate creditor access to immigrants’ credit information prior to their arrival in the United States in order to use that information in credit decisions.
- Work with other agencies to create a unified regulatory regime for new and innovative technologies providing services similar to banks.
- Exercise caution (which it said was a “recommendation for the CFPB, Congress, and other federal and state regulators”) in restricting the use of nonfinancial alternative data, “which can be very useful indicators of creditworthiness.”