(Feb. 26, 2021) Comments are due March 9 on NCUA’s request for information (RFI) on how the agency can improve its communications and improve transparency. A NASCUS comment letter is in the works; see the link below for the NASCUS summary of the RFI (available to members only) … NCUA joined federal and state banking regulators this week in encouraging credit unions and banks to alter loan terms, ease regulatory reporting requirements, and take other actions to help borrowers in Texas affected by bitter cold temperatures spawned by recent winter storms which led to widespread power outages and water shortages throughout the state. The regulators released a joint letter outlining actions institutions could take “to meet the financial services needs of their communities” … The White House this week announced several measures to ensure the smallest firms have access to loans made through the Small Business Administration’s (SBA) Paycheck Protection Program (PPP). The measures include an exclusive 14-day application window (starting Feb. 24) for firms with fewer than 20 workers, a revised loan calculation, and funding set-aside for sole proprietors and self-employed individuals and new eligibility for businesses owned by those with certain felony convictions.
LINKS:
NASCUS Summary: NCUA Request for Information, Communications & Transparency
(Feb. 26, 2021) Updates to the small-entity compliance guide on the ability-to-repay/qualified mortgage (QM) rule were also issued this week by the bureau, reflecting amendments to last year’s final rules to extend the government-sponsored enterprise (GSE) patch, or what the bureau now calls the “temporary GSE QM rule.”
The rule is used for loans that are eligible for purchase or guaranteed by Fannie Mae or Freddie Mac, creating a seasoned QM definition, and revising what is now called the general QM definition.
The bureau announced its compliance guide updates in an email that also included the statement regarding potential future action on the seasoned QM rule and revised general QM rule.
LINK:
Ability-to-Repay and Qualified Mortgage Rule Small-Entity Compliance Guide, February 2021
(Feb. 26, 2021) Honorees of the 2020-2021 Pierre Jay Awards – the highest honors bestowed by NASCUS for persons or entities demonstrating service, commitment and leadership to the state system – are Patty Idol, Kim Santos and Sarah Vega, the association announced this week.
“We celebrate their accomplishments to recognize their contributions and inspire others to achieve collaborative greatness,” said NASCUS President and CEO, Lucy Ito. “The selection committee, NASCUS leadership and I are proud to honor each one of them as a Pierre Jay Award recipient.”
Idol is the former president and CEO of Mountain Credit Union in Waynesville, N.C., where she began her career as a branch manager. Over 35 years, she rose through the ranks at the credit union and in the credit union system, becoming chair of the NASCUS Credit Union Advisory Council, chair of the Carolinas Credit Union League (CCUL) Board and president of the Western Chapter of CCUL. She also served on the NASCUS Education Committee and as a trustee of the National Institute of State Credit Union Examination (NISCUE) which is NASCUS’ education foundation benefiting state credit union examiners and regulators. Idol, together with award honoree Kim Santos, was instrumental in guiding NISCUE to make funds available for training beyond NASCUS’ offerings.
Santos is director ofthe Office of Credit Unions (OCU) at the Wisconsin Department of Financial Institutions in Madison, Wis., where in 1992 she began her career as a credit union examiner. Since 2013, she has supervised the 118 state-chartered credit unions in her state as director of the OCU. She has served the state system at large through NASCUS as an association leader, including as a member of the NASCUS Regulator Board, the association’s Legislative and Regulatory Committee, as the Chairman of the NASCUS Audit Committee, a member of the Joint NCUA-SSA Supervisory Working Group, and as a trustee of NISCUE
Vega is the former chief of staff to former NCUA Board Chairman Mark McWatters, where she also served as a senior policy advisor. She also previously served as chief of staff to former NCUA Board Chairman Michael Fryzel – and has the distinction of being the only person to have served as top staffer to two NCUA Board chairmen. She is the former director of the Illinois Division of Financial Institutions, a role in which she also served as chairman of the NASCUS Regulator Board. Vega was one of the first state agency heads to form an industry advisory body in establishing the Governor’s Advisory Board, a group of credit union advisors that provides feedback to the Illinois regulatory agency and listens to the needs and concerns of credit unions in the state. She was instrumental in modernizing the Credit Union Act in Illinois to reflect the changing landscape of financial services. During her chairmanship at NASCUS, Vega led the state system through its work with NCUA to develop both the Prompt Corrective Action (PCA) and the Member Business Lending (MBL) rules as required by the Congress’ passage of H.R. 1151.
The three will be honored in a virtual recognition ceremony set for April 22. They were chosen by a panel of state system representatives (from both state supervisory agencies and credit unions).
First presented in 1997, the Pierre Jay Awards commemorate the first Commissioner of Banks in Massachusetts — Pierre Jay — who was also the first-ever credit union regulator in the United States. Working with philanthropist and credit union pioneer Edward Filene of Boston, Jay went on to champion credit union development in the United States. Through Jay’s perseverance and service, he is widely acknowledged as having profoundly shaped credit union history.
NASCUS members annually may nominate for the award an individual or organization/committee that shows outstanding commitment and dedication to the state credit union system. Nominations are reviewed by NASCUS’ Pierre Jay Award Committee, and a winner is selected based on specific judging criteria.
LINK:
NASCUS Pierre Jay Award
(Feb. 26, 2021) Final rules on subordinated debt and corporate credit unions were finally published in the Federal Register this week, completing the action on the final rules and opening the comment period on the proposal.
The rule on subordinated debt takes effect Jan. 1, 2022; the rule on corporate credit unions takes effect the same date.
Adopted in December by the NCUA Board, the subordinated debt rule would allow well-capitalized FICUs to count subordinated debt as capital for risk-based net worth purposes.
Key provisions of the rule include:
- Permission for low-income-designated credit unions (LICUs), complex credit unions, and new credit unions to issue subordinated debt for purposes of regulatory capital treatment.
- A maximum maturity of 20 years to be imposed on debt issued (with a minimum maturity of five years), and a minimum denomination of $100,000. The agency noted the maturity limit helps to clarify that the financial instruments issued are debt – and not equity in the credit unions (which is solely owned by the members; credit unions do not issue stock).
- Prohibitions on a credit union from being both an issuer and investor unless the credit union meets certain conditions related to mergers.
- A section addressing new rules and limits for making loans to other credit unions, including investing in subordinated debt at those credit unions.
The effective date of the rule (Jan. 1, 2022) coincides with the implementation of new risk-based capital rules for credit unions.
The corporate rule, proposed a year ago (in February 2020) included a section on allowing corporate credit unions to purchase subordinated debt from credit unions. The bulk of the corporate rule was adopted as a final regulation by the NCUA Board in October – however, the portion on purchase of subordinated debt was left out of the final rule. The board said then it would adopt that portion of the rule once it had finalized the subordinated debt final rule. Since that rule was adopted in December, the board has now finalized the subordinated debt portion of the corporate rule.
The final rule now makes clear that corporate credit unions may purchase subordinated debt instruments issued by natural person credit unions. The final rule also specifies the capital treatment of these instruments for corporate credit unions that purchase them.
LINKS:
Final rule: Subordinated Debt
Final rule: Corporate credit unions
(Feb. 26, 2021) Registration for the NASCUS 2021 National Meeting of state regulators, March 17-18, is now open; all top regulators from each state are encouraged to attend.
The annual meeting, for state regulators only, brings together state credit union supervisors from around the country to take a close look at key issues, discuss common challenges, and exchange ideas in the NASCUS-sponsored event.
“The key component of this annual gathering is the dialogue it generates among the state regulators, particularly as they address common challenges and goals for the state credit union system,” said NASCUS’ Lucy Ito. “Each year, with input from the regulators, we assemble a list of topics and ideas that helps the regulators, as a group, determine solutions and paths forward. It’s a dynamic event with an emphasis on results.”
This year’s two-day event, to be held virtually, includes sessions on the future of payment systems, the future of capital in credit unions and the broader system, and; climate change as a safety and soundness issue.
NCUA Board Chairman Todd Harper is also scheduled to address the group and participate in dialogue during an exclusive session.
For more information, including the complete agenda and registration, see the link below.
LINK:
NASCUS 2021 National Meeting (regulator members only)
(Feb. 26, 2021) Summaries on NCUA proposals for simplifying risk-based capital (RBC) requirements and on the complex credit union threshold under risk-based net worth (RBNW) for relief during theCOVID-19 pandemic have been published by NASCUS.
Both summaries are available to members only.
Last month, the board issued an advance notice of proposed rulemaking (on a vote of 2-1, with now-Chairman Todd Harper dissenting) to invite comment on two approaches to simplify risk-based capital (RBC) requirements. Under the proposal, the agency envisions:
(1) replacing the risk-based capital rule with a risk-based leverage ratio requirement, which would use relevant risk attribute thresholds to determine which complex credit unions would be required to hold additional capital; and
(2) retaining the risk-based capital rule (approved in 2015 and revised numerous times, with two delays in effective dates) but enabling eligible complex FICUs to opt-in to a “complex credit union leverage ratio” (CCULR) framework to meet all regulatory capital requirements.
The CCULR approach would be modeled on the “community bank leverage ratio” framework implemented under the 2018 economic growth and regulatory relief law. A 60-day comment period was assigned to the proposal (As of Thursday, it had not yet been published in the Federal Register; that publication date launches the comment period).
Also in January, NCUA proposed (on a vote of 2-1, with Harper again dissenting) to raise the asset threshold for defining a credit union as “complex” for purposes of being subject to any RBNW requirement in its regulations. According to the agency, the proposal would amend the regulations to provide that any RBNW requirement will be applicable only to a federally insured credit union (FICU) with assets that exceed $500 million and an RBNW requirement that exceeds 6%.
“The COVID-19 pandemic has created a vital need for financial institutions, including credit unions, to provide access to responsible credit and other member services to support consumers,” NCUA said in its proposal. “Implementing this regulatory change in advance of Jan. 1, 2022, the effective date of the 2015 final risk-based capital (RBC) rule issued by the NCUA, would provide necessary capital relief to a significant number of credit unions without substantially decreasing the safety and soundness of credit unions or the National Credit Union Share Insurance Fund (NCUSIF).”
Comments are due by March 25.
LINKS:
NASCUS Summary: ANPR, Simplification of the RBC Requirements (Parts 702 & 703) (members only)
Proposed rule: Risk-Based Net Worth – COVID-19 Regulatory Relief
(Feb. 26, 2021) NCUA this week published its regulatory review roster for 2021, listing the one-third of its rules that it is reviewing – part of the three-year review plan by the agency.
NASCUS annually provides comments on the review and plans to do so again this year.
Under the review plan, the agency’s Office of General Counsel maintains a rolling review schedule of one-third of NCUA rules each year, and seeks public comment on those.
Among the rules being reviewed this round: Security program, report of suspected crimes, suspicious transactions, catastrophic acts and Bank Secrecy Act compliance (Part 748 of the agency’s rules); Golden parachute and indemnification payments (Part 750); Registration of residential mortgage loan originators (Part 761); Rules of NCUA Board procedure, promulgation of NCUA rules and regulations, public observation of NCUA Board meetings (Part 791); and Post-employment restrictions for certain NCUA examiners (Part 796).
LINK:
NCUA 2021 Regulatory Review
(Feb. 26, 2021) Updates to four sections of the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual were released Thursday by NCUA, federal banking regulators and the State Liaison Committee of the FFIEC.
Sections updated were the introduction (“Assessing Compliance with Bank Secrecy Act Regulatory Requirements”), customer identification program, currency transaction reporting (CTR) and transactions of exempt persons.
As they typically do, the agencies and the committee noted that the updates “should not be interpreted as new instructions or as a new or increased focus on certain areas.” Instead, they said, the updates are intended to offer further transparency into the examination process and support risk-focused examination work.
LINK:
Federal and State Regulators Release Updates to the BSA/AML Examination Manual
(Feb. 26, 2021) A comment letter supporting NCUA’s proposed rule about credit union exemptions from filing suspicious activity reports (SARs) has been submitted by NASCUS, which also some recommendations for changes in the proposal.
The letter supports NCUA’s proposed rule on the Bank Secrecy Act (BSA) providing the agency leeway to grant federally insured credit unions (FICUs) exemptions from NCUA rules implementing SAR filing requirements. More specifically, in its proposal, the agency 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
NASCUS wrote that emphasizing substantive SAR results over procedural compliance will result in “SAR data that is potentially of greater use to law enforcement and national security stakeholders and is consistent with the intent and spirit of the BSA.”
The association made recommendations for improvements in the proposal, intended to clarify the rule and reduce regulatory burden for credit unions. Among those recommendations:
- Commit to consulting with the appropriate state regulator when evaluating a request for an exemption;
- Clarify what “classes” or “select groups” may apply for an exemption or have a third party apply for an exemption on their behalf from certain SAR filings;
- Specify to which NCUA office to send a request for exemption.
“NASCUS and state regulators remain committed to working with stakeholders and with NCUA to ensure the credit union system is protected from bad actors that would seek to exploit that system in furtherance of criminal enterprise,” NASCUS wrote. “We strongly encourage NCUA to consider how the exemption process will be implemented within the context of affiliated or collaborating credit unions such as in shared branches or services centers, centralized CUSO compliance, and shared back-office situations.”
LINK:
NASCUS Comment letter: Proposed Rule: Bank Secrecy Act – RIN 3133–AF25
(Feb. 26, 2021) Revoking or revising the “seasoned” qualified mortgage (QM) final rule issued in December is under consideration by CFPB, according to a statement issued this week by the bureau.
The agency, in that statement (circulated along with a notice of small-entity compliance guide updates), also said it was looking at whether to delay the July 1 mandatory compliance date for the December final rule on the general QM loan definition. Both rules, which created a “seasoned” QM loan definition and revised the existing QM loan definition – now called the general QM definition – are set to take effect March 1, with mandatory compliance generally set for July 1. But that July date may be tentative, according to the statement.
The new seasoned QM and general QM definitions in those rules also replaced the debt-to-income (DTI) ratio ceiling as a QM factor, instead using performance requirements and a pricing component, respectively.
In its statement, the bureau said that if it decides to revisit the seasoned QM rule, it expects to consider in that rulemaking whether any potential final rule revoking or amending seasoned QM should affect covered transactions for which an application was received during the period from March 1, 2021 until the effective date of such a final rule.
In the meantime, the agency said, it expects to issue a proposal that would delay the July 1 mandatory compliance date of the general QM rule. According to the bureau, if a delay is finalized, creditors would be able to use either the current general QM loan definition or the revised general QM loan definition for applications received during the period from March 1, 2021, until the delayed mandatory compliance date.
“Furthermore, the Bureau anticipates that the Temporary GSE QM loan definition will remain in effect until the new mandatory compliance date, in accordance with the October 20, 2020 final rule described above, except that the Temporary GSE QM loan definition would expire with respect to a GSE if that GSE ceases to operate under conservatorship prior to the new mandatory compliance date.”
Other rulemakings to reconsider other aspects of the general QM final rule are possible too, the agency signalled.