(July 16, 2021) A proposed rule on a new complex credit union leverage ratio (CCULR) is on the agenda for a the NCUA Board when it meets next week in open session.
Also on the agenda for the 10 a.m. meeting (to be live-streamed via the Internet) will be a request for information (RFI) on digital assets and related technologies. The board will also consider its 2022-26 strategic plan.
Based on past comments by the agency, the CCULR proposal would likely integrate an NCUA equivalent of the community bank leverage ratio (CBLR) into NCUA’s capital standards. The bank regulation (adopted by federal banking agencies in 2019) removes requirements for calculating and reporting risk-based capital ratios for most banks with less than $10 billion in assets, more than 9% in risk-based capital, and that meet certain risk-based qualifying criteria. Banks meeting the criteria can “opt-in” to use the CBLR.
In a comment letter filed in May with the agency, NASCUS said it was encouraged by the agency’s consideration of a CCULR, and supported further development.
“NASCUS has previously encouraged NCUA to consider adopting an off-ramp to the 2015 Risk-Based Capital Rule commensurate with the Community Bank Leverage Ratio (CBLR),” NASCUS wrote in its May 10 comment letter on a related issued, simplifying risk-based capital requirements.
“The flexibility of parallel, complementary risk-based capital rules will allow credit unions to choose which approach is most compatible with their business model,” NASCUS added. “Additionally, the CCULR proposal would allow both the 2015 RBC Rule and Subordinated Debt Rules to go into effect. The optional nature of the CCULR would also permit parallel development of the new rule with the simultaneous implementation of the existing 2015 RBC rules, providing credit unions with the choice to opt in and out of the CCULR in the future.”
NASCUS also noted, in its comment, that parallels between a CCULR proposal and the existing bank CBLR is another advantage. “The regulatory and commercial experience with the CBLR can help inform the development and implementation of NCUA’s CCULR proposal,” NASCUS wrote.
LINK:
NCUA Board agenda, July 22 meeting
(July 16, 2021) Rule changes to incorporate just-issued national priorities for combatting money laundering and financing of terrorism – as outlined in an NCUA Letter to Credit Unions (LTCU) late last month — are summarized by NASCUS and posted this week; like all summaries, it is available to members only.
Late last month, NCUA issued LTCU 21-CU-05, which detail priorities for anti-money laundering (AML) efforts and countering the financing of terrorism (CFT) set by the Treasury’s Financial Crimes Enforcement Network (FinCEN). The priorities describe “the most significant AML/CFT threats currently facing the United States,” according to FinCEN. The priorities include corruption, cybercrime, domestic and international terrorist financing, fraud, transnational criminal organizations, drug trafficking organizations, human trafficking and human smuggling, and proliferation financing.
NCUA (as stated in its letter to credit unions) indicated that while it is not required to do so, the agency plans to propose changes to its own BSA rules addressing the priorities. Credit unions (as well as banks and nonbanks, the target of a separate FinCEN statement) are not required to make any changes in their risk-based BSA compliance programs, and examiners will not review institutions for incorporation of the AML/CFT priorities into those programs, until the effective date of a final rule, NCUA and FinCEN said.
Also in its letter, NCUA said credit unions “may wish to start considering how they will incorporate the AML/CFT Priorities into their risk- based BSA compliance programs.”
LINK:
NASCUS Summary: Letter to Credit Unions 21-CU-05 Interagency Statement on the Issuance of the AML/CFT National Priorities (members only)
(July 16, 2021) Summaries of two final rules – on transition to the new current expected credit loss (CECL) accounting standard, and on derivatives – have been posted on the NASCUS website. Both summaries are available to members only.
At its June meeting, the NCUA Board adopted a final rule intended to mitigate the day-one effect of the CECL accounting standard on capital levels at credit unions. The new rule takes effect Aug. 2 (although NCUA, when the final was adopted, that credit unions could begin applying it immediately); the CECL standard takes effect for most credit unions in January 2023.
Supported by NASCUS, the rule establishes a three-year phase-in period for adverse effects on credit unions’ regulatory capital triggered by the effect of the accounting standard. Federal credit unions with less than $10 million in assets and also state credit unions (if allowed by their state regulations), would be exempted from using the standard to figure loan loss reserves.
The final rule has two changes from the proposal, as advanced by NASCUS. First, the rule makes a technical change (for clarity) removing references to specific calendar dates in the transition period for the phase in. The rule now consistently refers to fiscal years. The second change clarifies that state-chartered FICUs with less than $10 million in assets and that are required by state law to comply with generally accepted accounting practices (GAAP) are eligible for the transition phase-in.
However, NASCUS also noted that the accounting standard remains of concern. “NASCUS, many state credit union regulators, and many state credit union system stakeholders remain concerned that the CECL methodology will be counter-productive when implemented for the credit union system,” NASCUS wrote.
The derivatives rule, approved unanimously by the NCUA Board at its May meeting, makes some changes from the proposal issued in December. The rule affects a limited number of federal credit unions directly (NCUA estimates about 30 FCUs are engaged with derivatives now); it generally offers more flexibility for credit union involvement in the investment vehicles, primarily to manage interest rate risk. State-chartered credit unions follow rules set by their individual regulators.
NASCUS had urged the agency, in its comment on the proposal, to eliminate redundant supervisory notice requirements, where applicable, by providing 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. NCUA declined to make that change, arguing that “the current burden to a FISCU is unchanged as the FISCU is only notifying the applicable (NCUA) Regional Director after entering into its first Derivative transaction compared to the current requirement of notifying the Regional Director at least 30 days before it begins engaging in Derivatives.”
LINKS:
NASCUS Summary: Final Rule, Part 702, Current Expected Credit Loss (CECL) Methodology (members only)
NASCUS Summary: Final Rule, Parts 701, 703, 741, and 746, Derivatives (members only)
(July 16, 2021) A 14-day application extension is among the “clarifications and amendments” planned for the capital investment program created for community development financial institutions (CDFIs) and minority depository institutions (MDIs) in the face of the coronavirus crisis, NCUA reminded late last week.
NCUA drew attention to the extension in an “NCUA Express” item made public July 8. The extension is part of revisions being made to the Emergency Capital Investment Program (ECIP) developed by Treasury last year to assist CDFIs and MDIs that may be disproportionately affected by the financial impacts of the COVID-19 pandemic.
In a July 1 announcement, Treasury said the deadline to submit an application under the ECIP would be extended by 14 days once guidance is published by Treasury (which, as of Thursday, had not been released). The previous deadline was July 6. No other details were provided on the planned. clarifications and amendments.
The ECIP was established under the Consolidated Appropriations Act, 2021. Under this program, Treasury will provide up to $9 billion in capital directly to depository institutions that are certified CDFIs or MDIs. The funding may be used to provide loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers – especially those in low-income and underserved communities – that may be disproportionately impacted by the economic effects of the COVID-19 pandemic. Treasury says it will set aside $2 billion for CDFIs and MDIs with less than $500 million in assets and an additional $2 billion for CDFIs and MDIs with less than $2 billion in assets.
Revisions to already-submitted applications made be requested via Treasury; see the link below.
LINK:
Treasury Emergency Capital Investment Program
(July 16, 2021) A focus on consumer financial protections for military servicemembers and their families is the target of a webinar slated July 28 by NCUA, CFPB and the Federal Trade Commission (FTC). The webinar is being held as part of Military Consumer Month. In its announcement this week, NCUA said staff from all three agencies will highlight federal resources that help servicemembers, veterans, and their families manage their finances and shield themselves against frauds and scams. The 45-minute webinar begins at 2 p.m. Registration is open now.
LINK:
Registration for NCUA, CFPB, FTC miltary consumer financial protections webinar
(July 16, 2021) NASCUS 101 – the popular series of webinars that explains how NASCUS members can get the most out of their memberships – is just around the corner — set for Aug. 12 – and there’s plenty of time to register to attend.
The series of webinars covers the many ways NASCUS members can reap the most of their memberships, in just 30 minutes, with a concise, but detailed, overview touching on NASCUS legislative and regulatory (L&R) resources, educational offerings and webinars, member engagement, as well as news and data.
In addition to the August session, NASCUS 101 is also scheduled for Oct. 14 and Dec. 9. See the link below for more details, including registration.
LINK:
NASCUS 101 (via the NASCUS Member Portal)
(July 16, 2021) The “first phase” of NCUA’s plan to resume onsite operations – including exams — will begin Monday, the agency said this week, with staff and contractors permitted to volunteer to work onsite in locations where pandemic conditions have “sufficiently moderated,” the agency’s chairman said in a Letter to Credit Unions Wednesday.
In a letter to credit unions (NCUA letter 21-CU-06), NCUA Board Chairman Todd Harper said the determination of whether conditions have sufficiently moderated will be based on public health data for those areas.
“To the extent they exceed the NCUA’s safety protocols for Phase 1, NCUA staff working onsite in credit unions will generally be expected to follow credit union policies related to safety and security,” Harper wrote. “To the extent possible, the NCUA will respect a credit union’s preference to not have examination staff onsite during this phase. However, the NCUA reserves the right to conduct onsite work at a credit union if necessary to address a serious and time-sensitive matter.”
NCUA will continue to maintain heightened safeguards in its facilities to ensure the health and safety of staff and any visitors, the letter states. It also points out that the agency will continue to monitor conditions and inform credit unions of any changes in how it plans to conduct operations, “including examination procedures and protocols affected by the pandemic.”
NASCUS has already prepared a summary of the letter (available to members only).
LINKS:
(July 16, 2021) NASCUS has joined the “I Love My CU” program developed by the Illinois Credit Union League, and will participate in the July 30 social media platform effort to raise awareness about credit unions and share stories about the things they do to help consumers and their communities. A key part of the program: posting, on the same day, social media messages with the same message, with the same hashtag ‘’ #ilovemycreditunion.
NASCUS continually updates its “Around the States” section on nascus.org, with the latest developments within the state system, state by state. Among states with latest updates are Indiana, California, Idaho, Illinois, Louisiana, Nebraska (and more). For more details on the very latest (in Indiana), see the link below.
LINKS:
Details on I Love My Credit Union
Indiana update: Around the states
(July 16, 2021) Agencies in five states – Idaho, Indiana, North Dakota, Tennessee and Vermont – are newly accredited under the association’s Accreditation Program, NASCUS announced this week.
The agencies newly accredited are:
- Idaho Department of Finance – Financial Institutions Bureau
- Indiana Department of Financial Institutions – Division of Credit Unions
- North Dakota Department of Financial Institutions – Credit Union Program
- Tennessee Department of Financial Institutions – Credit Union Division
- Vermont Department of Financial Regulation – Credit Union Program
More than 72% of the $989 billion in state-chartered credit union assets are supervised by NASCUS’ 28 accredited state agencies. The program, marking its 32nd year, administers and assures state credit union examination and supervision quality standards. It is modeled on the university accreditation concept, applying national performance standards to a state’s credit union regulatory program.
According to NASCUS President and CEO Lucy Ito, accreditation is direct evidence of an agency’s capabilities, and benefits all credit unions in the state “Accreditation provides recognition of the professionalism of a state agency’s regulators, supervisors, and staff, while potentially delivering an impetus and support for legislation to modify state law and policy changes to advance state supervisory processes and best practices,” she added.
To earn accreditation, a credit union state supervisory agency must demonstrate it meets accreditation standards in agency administration and finance, personnel and training, examination, supervision, and legislative powers.
For more details, including comments from state regulators in each of the accredited agencies, see the press release issued this week.
LINK:
NASCUS Announces Five Newly Accredited States
(July 16, 2021) Welcome to accounting and consulting firm SingerLewak as the latest NASCUS associate member. Partner Sheila Balzer in the firm’s Denver operations is the leader for its expertise in state credit union operating and loan systems … Former Fed official Nellie Liang (and Fed Board nominee by former President Donald Trump (R)) was confirmed by the Senate Thursday as Treasury under secretary for domestic finance – responsible for policy on financial institutions, financial markets, and more – with nearly three-fourths of the Senate voting in favor. The under secretary’s office serves as a key contact for NCUA and other independent federal financial regulators … NASCUS was on the scene this week as the State Liaison Council (SLC) of the FFIEC was briefed, and as the FFIEC itself met, in Washington. NASCUS is a member of the SLC, which advises the FFIEC to “encourage the application of “uniform examination principles and standards by state and federal supervisory agencies.”