Oct. 20, 2022 – The National Credit Union Administration Board held its ninth open meeting—and second in person—of 2022, and approved the agency’s Enterprise Risk Appetite Statement, which helps the agency align risks and opportunities when making decisions and allocating resources to achieve the agency’s strategic goals and objectives.
The NCUA Board was also briefed on the state of the Central Liquidity Facility (CLF) and cybersecurity trends affecting federally insured credit unions and the broader financial system.
Read the remarks by the NCUA Board Members Here
Board Approves New Enterprise Risk Appetite Statement
The NCUA Board unanimously approved the NCUA’s new enterprise risk appetite statement prepared by the agency’s Enterprise Risk Management Council. The statement is a management tool that provides guidance from agency leadership to managers and staff on the amount of risk the NCUA is willing to undertake in pursuit of its objectives.
“The enterprise risk appetite statement presented today is part of the NCUA’s overall management approach. And, I am especially pleased that we will have an averse risk appetite when addressing identified safety and soundness concerns at credit unions,” NCUA Chairman Todd M. Harper said. “This means we will be risk-focused and ready to act expeditiously if needed. I also appreciate that through this statement we will remain focused on ensuring compliance with and enforcement of federal consumer financial protection laws and regulations at credit unions.”
The NCUA’s Enterprise Risk Management Council developed a risk appetite statement through careful consideration and evaluation of the risks the agency faces and focused on achieving several programmatic goals, which included:
- Communicating guidelines about the levels of risk the NCUA is willing to accept in pursuit of its mission and goals;
- Promoting consistency in understanding, measuring, and managing risk across the enterprise;
- Informing agency responses to risks and decision-making to balance limited time and resources; and
- Driving a more risk-aware culture.
Briefing Highlights Central Liquidity Fund’s Status for 3rd Quarter
The Central Liquidity Facility President briefed the NCUA Board on the status of the Central Liquidity Fund as of September 30, 2022. The briefing covered liquidity and contingency funding plans, liquidity sources and needs, CLF advances, and membership requirements. The CLF president also discussed enhancements to the CLF’s processes and structures to ensure it can serve as an effective liquidity backstop for the credit union system should the need arise.
Said Chairman Harper, “The CLF is a vital source of emergency liquidity within the credit union system. However, the pending expiration of the temporary CLF enhancements authorized by Congress at the start of the COVID-19 pandemic remains a very real concern. While we are grateful to Congress for allowing the CLF enhancements of the last few years, there is a real need to keep in place the ability of corporate credit unions to serve as a CLF agent for a subset of their members. That authority will allow us to provide emergency liquidity quickly when needed.”
Financial highlights for the CLF in the third quarter include:
- $1.243 billion in total assets;
- $1.1 million in year-to-date net income;
- $40.5 million in retained earnings;
- 2.24 percent dividend was paid to members of the CLF in the third quarter;
- 3,991 corporate credit unions and consumer credit unions have access to the CLF; and
- $29.1 billion in borrowing authority for the CLF.
The Central Liquidity Facility is an NCUA-operated, mixed-ownership government corporation that was created to improve the general financial stability of credit unions by serving as a liquidity lender to credit unions experiencing unusual or unexpected liquidity shortfalls. Member credit unions own the CLF, which exists within the NCUA. The CLF’s President manages the facility under the oversight of the NCUA Board.
Cybersecurity Threats Continue, NCUA Launches ISE Program at Year-end
Ransomware, cloud migration, and distributed denial-of-service attacks are contributing to a dynamic threat landscape that creates evolving risks for federally insured credit unions, according to a briefing provided to the NCUA Board by the agency’s Critical Infrastructure Division. Additionally, rising geopolitical tensions continue to increase the potential for cyberattacks on the financial system and other parts of the nation’s critical infrastructure.
“Each of us — the NCUA, state supervisory authorities, vendors, and credit unions — has a responsibility to protect our systems, improve our ability to recover from incidents, educate our teams, share information, and report and address potential vulnerabilities,” Chairman Harper said. “Our chain is only as strong as our weakest link, so we all must be hypervigilant to prevent a catastrophic failure.”
The briefing also outlined good cyber hygiene practices, summarized the NCUA’s proposed cyber incident reporting rule, and provided an update on the NCUA’s Information Security Examination (ISE) Program. This new examination program offers flexibility for credit unions of all asset sizes and complexity levels while providing examiners with standardized review steps to facilitate advanced data collection and analysis. These new examination procedures will assist the credit union system in preparing for, withstanding, and recovering from cybersecurity threats. The ISE examination procedures will be deployed at the end of 2022.
The NCUA strongly encourages credit unions to strengthen their cybersecurity programs and preparedness and immediately report known details of cyber incidents to the NCUA, the FBI, and the Cybersecurity and Infrastructure Security Agency.
Credit unions are also encouraged to download and use the NCUA’s Automated Cybersecurity Evaluation Toolbox, or ACET. The ACET is an excellent resource for small credit unions or those credit unions with limited resources to take the first steps in understanding their level of cyber preparedness. Additional cyber-related information and resources are available on the NCUA’s cybersecurity resources webpage.
(Jan. 28, 2022) Boards of federal credit unions (FCUs) would be required to “establish and adhere to” processes for succession planning under a proposal issued, on a 2-1 vote, by the NCUA Board Thursday.
The proposal only affects FCUs. NCUA noted that federally insured, state-chartered credit unions (FISCUs) must comply with any state-specific requirements pertaining to succession planning. “However, the Board encourages FISCU boards, to the extent compatible with state law, to undertake succession planning efforts to help ensure continued viability of their credit union,” NCUA said in the proposal.
In fact, the proposal’s summary notes that, although it would apply only to FCUs, “the Board’s purpose is to encourage and strengthen succession planning for all credit unions.”
The proposal also does not affect federally insured corporate credit unions, the agency noted. NCUA said its regulations (under 12 CFR part 704) already “adequately address succession planning” at the corporates.
According to the proposal, succession plans will help to ensure that the FCU has plans to fill key positions, such as officers of the board, management officials, executive committee members, supervisory committee members, and (if provided for in the bylaws) the members of the credit committee to provide continuity of operations.
“In addition, the proposed rule would require directors to be knowledgeable about the FCU’s succession plan,” the proposal states.
One of the reasons that the proposal was issued, according to the agency, is that credit union consolidation largely through mergers is being driven by lack of succession planning. “An NCUA analysis found that poor management succession planning was either a primary or secondary reason for almost a third (32 percent) of credit union consolidations,” the agency said.
At the same time, the agency said, another reason for a heightened focus on succession planning is the ongoing retirements of the “Baby Boomer” generation of individuals born between 1946 and 1964.
“According to some sources, approximately 10 percent of credit union chief executive officers were expected to retire between 2019 and 2021,” the agency asserted.
NCUA Board Member Rodney Hood voted against the proposal because, he said, the agency has “other tools in its toolbox” other than a regulation to help credit unions deal with succession planning. He suggested, for example, greater uses of webinars sponsored by the agency. Both Board Chairman Todd Harper and Vice Chairman Kyle Hauptman supported issuing the proposal for a 60-day comment period.
In other action, the board:
- Heard a briefing on the agency’s Central Liquidity Facility (CLF), including plans to increase credit union membership in the facility to “to better serve individual CUs, the Share Insurance Fund and the system overall.” The agency also noted that it continues to advocate for Congress restoring and making permanent the enhanced authorities provided to the CLF as part of the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act and extended (until the end of 2021) by Congress in early 2021. The enhancements are: Increasing the facility’s maximum legal borrowing authority; permitting temporary access for corporate credit unions, as agent members, to borrow for their own needs; providing greater flexibility and affordability to agent members to join and serve smaller groups of their covered institutions than their entire memberships; and providing the NCUA Board with more clarity and flexibility regarding the loans.
- Listened to a briefing on the agency’s supervisory priorities for 2022 (which echoed the letter sent to all federally insured credit unions the week before). However, the agency staff said regarding the current expected credit loss (CECL) accounting standard, which takes effect for credit unions next year, the agency will be providing training and guidance to credit unions as they adopt the new accounting model – including a spreadsheet to be released later this year. Additional training, the agency said, would be made available to credit unions on an as-needed basis.
- Heard an update on its final rule (approved by a board notation vote late last month) on adjusting the maximum amount of civil monetary penalty (CMP) amounts, as required by statute, a somewhat routine action that other federal financial institution regulators have already taken this month.
LINKS:
Proposed Rule, Part 701, Succession Planning.
Board Briefing, 2022 Supervisory Priorities
Board Briefing, Final Rule, Part 747, Statutory Inflation of Civil Monetary Penalties.
(Jan. 21, 2022) A proposed rule on succession planning at federal credit unions (under Part 701 of NCUA regulations), and a final rule on resetting civil monetary penalties (CMP), as well as three board briefings, are on the agenda for the NCUA Board when it meets Thursday.
The meeting is set to begin at 10 a.m. ET and scheduled to be live-streamed via the Internet.
The final rule on CMPs (under Part 747 of the agency’s regulations) is also scheduled for a board briefing. The final rule, which essentially updates an existing rule at the agency, will address statutory inflation of CMPs (the federal banking agencies have recently adopted similar rules for their agencies).
The other two board briefings will address the agency’s list of 2022 supervisory priorities (which was the subject of a letter to credit unions this week), and impact of the expiration of the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Consolidated Appropriations Act of late 2020 on the agency’s Central Liquidity Facility (CLF).
Both statutes were aimed primarily at providing fast, direct economic assistance to consumers and businesses to weather the financial impact of the coronavirus crisis. They also included provisions designed to strengthen the CLF over the duration of the pandemic.
LINK:
Board Agenda for the Jan. 27, 2022 Meeting
(Dec. 3, 2021) Congress should make permanent temporary enhancements to the fund that backs up credit union liquidity, which were made in response to the coronavirus crisis, the three members of the NCUA Board wrote this week.
However, if the changes cannot be made permanent, the board members allowed, Congress should consider at least a one-year extension.
The joint letter to Congress, signed by all three members of the NCUA Board, asked that the enhancements to the agency’s Central Liquidity Fund (CLF) be made permanent. The temporary changes were made via the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) of 2020.
Although those changes have been extended once already – in the Consolidated Appropriations Act of 2021 (which became effective in December 2020) – the changes are scheduled to expire on Dec. 31, according to the NCUA Board members’ letter. The letter indicated that by not making the changes permanent, thousands of credit unions could lose access to the liquidity facility. (The CLF, owned by credit unions and managed by NCUA, is a back-up source of liquidity for credit unions, like the way the Federal Reserve’s discount window provides access to loans for eligible banks and other financial institutions.)
As of October 2021, 4,107 credit unions or 82% of all federally insured credit unions have access to the CLF, up from 283 as of April 2020, the letter states. “The growth in the number of CLF members is a testament to our nation’s credit unions coming together in a time of crisis to strengthen the national system of cooperative credit.”
LINK:
NCUA Board Calls on Congress to Make CLF Enhancements Permanent
(May 28, 2021) Comment letters on NCUA’s interim final rules on asset thresholds for reporting purposes, and for conforming existing NCUA’s Central Liquidity Facility rules with new statutes, were submitted by NASCUS this week. The state system supported both interim rules.
Under the asset threshold rule, NCUA set March 31, 2020, as the date for determining the applicability of regulatory asset thresholds for such things as capital planning and stress testing at larger credit unions for the remainder of this year and all of next. The new rule affects about 10 large credit unions, NCUA said in March when it issued the interim rule, including those with state charters. It is meant to mitigate the impact of the influx of savings to credit unions, particularly larger ones, during the coronavirus crisis, according to the agency.
Even though it was an interim final rule, NCUA called for comments, which NASCUS and others supplied by this week’s deadline. NASCUS wrote that the March 31, 2020 date is an appropriate measurement date to use. “Many credit unions have experienced a surge in deposits during the pandemic and some level of post-pandemic run-off is expected,” NASCUS wrote. “Utilizing March 2020 data is a practical way to avoid subjecting credit unions to the additional compliance costs associated with the stress testing tiers that would, but for the pandemic inflation of their balance sheets, not otherwise have qualified for stress testing under Part 702 (of NCUA rules) at this time.
“Under the IFR, NCUA would only use the March 31, 2020 date to determine whether a credit union qualifies for stress testing and capital planning in 2022. We agree that providing this regulatory relief initially for one year is a prudently measured approach,” NASCUS told NCUA.
The second letter looks at the agency final interim rule updating its regulations for the agency’s Central Liquidity Facility (CLF). The changes grew out of the passage in December of the Consolidated Appropriations Act, 2021. That legislation extended several enhancements to the CLF (such as more flexible memberships) made in last year’s Coronavirus Aid, Relief, and Economic Security (CARES) Act. The new rule amends the NCUA’s CLF regulation to reflect these extensions. NCUA also sought comments (even though the rule is already in effect).
The state system told the federal regulator that it supports the interim rule, and noted that NCUA should “interpret its own authority broadly to make as many of the CLF changes permanent that it can and seek Congressional action for other changes as needed.
“A more flexible, responsive, and robust CLF is good for the credit union system,” NASCUS wrote. “It is also sound public policy.”
LINKS:
NASCUS Comments: Interim final rule, asset thresholds
NASCUS Comments: Interim final rule, Central Liquidity Facility
(April 2, 2021) Two new summaries – of a interim final rule concerning enhancements to NCUA’s Central Liquidity Facility (CLF) and of an NCUA “regulatory alert” on CFPB’s expanded exemptions concerning higher-priced mortgage loans (HMPLs) – were published by NASCUS this week.
As a benefit of membership, only members have access to the summaries.
Regarding the CLF enhancements, the NCUA Board approved the interim final rule (IFR) at its meeting March 18. Generally, it extends provisions enacted under the 2020 Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that expanded CLF access beyond natural person credit unions to include access for corporate credit unions or a group of corporates. That expansion, implemented under an interim rule a year ago, was due to expire Dec. 31, 2020, but was extended through Dec. 31, 2021, under the Consolidated Appropriations Act, 2021, enacted into law late last year. Also extended are provisions approved in April governing CLF capital stock subscriptions by agent members.
The IFR also extends and clarifies the regulatory provisions related to a member withdrawing from CLF membership: The immediate withdrawal period for credit unions that joined the CLF between April 29, 2020, and Dec. 31, 2020, now continues through Dec. 31, 2021; for those joining between Jan. 1 and Dec. 31, 2021, the immediate withdrawal period continues through Dec. 31, 2022.
The rule took effect March 24; comments are due by May 24.
Regarding the regulatory alert on HPMLs issued in mid-March, the summary addresses the CFPB’s rule issued in February. The rule exempts from the HPML escrow requirement any loan made by a bank or credit union and secured by a first lien on the principal dwelling of a consumer if:
- the institution has assets of $10 billion or less (as of Dec. 31 in the preceding year);
- the institution and its affiliates originated 1,000 or fewer loans secured by a first lien on a principal dwelling during the preceding calendar year; and
- certain of the existing HPML escrow exemption criteria are met.
Proposed in July, CFPB said the rule represents the last mandatory rulemaking to implement the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S.2155).
LINKS:
NASCUS Summary: Interim Final Rule, Central Liquidity Facility (CLF) (members only)
(March 19, 2021) Asset data as of March 31, 2020 will be used to determine the applicability of regulatory asset thresholds for such things as capital planning and stress testing at larger credit unions for the remainder of this year and all of next, under an interim final rule approved by the NCUA Board Thursday.
The new rule will affect about 10 large credit unions, NCUA said, including those with state charters. It is meant to mitigate the impact of the influx of savings to credit unions, particularly larger ones, during the coronavirus crisis. The savings surge has been fueled, at least in part, by federal stimulus payments (including the one just recently approved by Congress of $1,400 to individuals). Coupled with that surge, NCUA said, has been a slowdown in spending by consumers as they hunkered down for the economic downturn caused by the crisis, keeping share accounts higher.
“For FICUs (federally insured credit unions) just below $10 billion in assets, these factors have resulted in their balance sheets swelling by an average of about 14 percent, and in one case by more than 34 percent,” NCUA said. “In contrast, in 2019, FICUs with assets just below the $10 billion threshold had an average asset growth of only 9 percent.”
The agency asserted that, due to the surge in assets, many FICUs have been or will be pushed over the asset thresholds subjecting them to additional regulatory requirements, or supervision by the agency’s Office of National Examinations and Supervision (ONES), which mostly oversees larger credit unions. “Complying with these new or more stringent regulatory standards would impose additional transition and compliance costs on such FICUs that otherwise may not have become subject to these requirements at this time,” NCUA stated. “This interim final rule gives affected FICUs more time to either reduce their balance sheets, or to prepare for higher regulatory standards.”
NCUA also estimated that the balance sheet growth has not significantly increased the risk profile of the affected credit unions, although the agency reserves the authority to subject a credit union to ONES supervision or to designate it as a Tier I/II/III credit union depending on the circumstances surrounding the growth and the risks associated with the type or assets held or any additional activities undertaken by a credit union.
The interim final rule – approved unanimously by the board — takes effect upon publication in the Federal Register; a comment period of 60 days was also set for the rule.
In other action, the board approved (also unanimously) another interim final rule, that one updating its regulations for the Central Liquidity Facility (CLF). The changes grew out of the passage in December of the Consolidated Appropriations Act, 2021. That legislation extended several enhancements to the CLF (such as more flexible memberships) made in last year’s Coronavirus Aid, Relief, and Economic Security (CARES) Act. The new rule amends the NCUA’s CLF regulation to reflect these extensions. This rule also takes effect on publication in the Federal Register, and also will have a 60-day comment period.
LINK:
Interim final rule: Asset thresholds
Interim final rule: CLF conforming rules
(March 12, 2021) Two interim final rules – one on the agency’s Central Liquidity Facility, the other on asset thresholds pertaining to large credit unions – are slated for action Thursday (March 18) by the NCUA Board.
The three-member board, meeting in a virtual setting with audio transmitted via the Internet, will also receive a briefing on the NCUA Guaranteed Note (NGN) and Asset Management Estates Programs.
The interim rule on the CLF is under part 725 of the agency’s rules and regulations (governing operations and membership in the facility). The asset thresholds interim rule pertains to parts 700 (definitions), 702 (capital adequacy), 708a (bank conversions and mergers), 708b (mergers among credit unions), and 790 (NCUA operations).
LINK:
NCUA Board March 18 open meeting agenda
(Feb. 19, 2021) While four funds administered by NCUA all earned unmodified or “clean” audit opinions for 2020, the agency’s inspector general still outlined a number of 2021 challenges for credit unions that could have an impact on continuing that audit performance, according to a report issued this week.
The agency said its auditor, KPMG LLP, issued unmodified opinions for the National Credit Union Share Insurance Fund (NCUSIF), the agency’s operating fund, the Central Liquidity Facility (CLF), and the Community Development Revolving Loan Fund (CFRLF).
In issuing the audit opinions, the agency’s office of inspector general (OIG) also outlined as the major challenges in 2021 for credit unions (and the funds) to be: cyber threats, technology-driven changes to the financial landscape, interest-rate risk, membership trends, and a recovery from the coronavirus crisis.
“We believe the economy and credit unions’ recovery from the COVID-19 pandemic will be the NCUA’s greatest management challenge going forward in 2021 and possibly beyond,” the OIG report states.
“Even if the economy continues to recover as expected, the operating environment for credit unions over the next two years could prove to be more difficult than in prior years, and credit union performance could deteriorate,” the report adds. “Credit unions should plan for a range of economic outcomes that could affect their performance and resource needs.”
In the other areas, the report notes:
Cyber threats: “Credit unions’ increasing use of technology exposes the credit union system to increasing cyber-attacks. Specifically, malware, ransomware, distributed denial of service (DDOS) attacks, and other forms of cyber intrusion affect credit unions of all sizes and will continue to require ongoing measures for containment,” and pose significant dangers to the safety and soundness of credit unions, according to the report. The report urges credit unions to continue to harden, monitor, and enhance the security of their systems.
Technology changes: In addition to products that pose competitive challenges to credit unions by mimicking deposit and loan accounts (mobile payment systems, pre-paid shopping cards, peer-to-peer lending), credit unions will also face challenges from financial technology (fintech) companies in underwriting and lending, the report asserts. “Fintech companies may be able to automate these services at a cost below levels associated with more traditional financial institutions but may not be subject to the same regulations and safeguards that credit unions and other traditional financial institutions face. As these companies and products gain popularity, credit unions may have to be more active in marketing their products and services and rethink their business models.”
Interest-rate risk (IRR): NCUA and credit unions will need to focus on managing and mitigating interest-rate risk, the report states. Deposit rates have fallen since the start of 2020 and will likely remain low, pressuring credit unions to offer competitive deposit rates to avoid deposit attrition. Meanwhile, credit unions that rely primarily on investment income may find their net income remaining low or falling.
Membership: NCUA and credit unions face the challenge of an aging demographic, the report states, “and unfortunately, these same membership concerns continue.” The report claims that although overall credit union membership continues to grow strongly, close to half of federally insured credit unions had fewer members at the end of the third quarter of 2020 than a year earlier. “All credit unions need to consider whether their product mix is consistent with their members’ needs and demographic profile,” the report states.
LINK:
NCUA’s Four Funds Receive Clean 2020 Audit Opinions
(Jan. 29, 2021) NASCUS summaries of recent NCUA letters to credit unions – and a summary of a regulatory alert issued by the agency – are among the latest to be published by NASCUS. All three are available to members only.
The two letters summarized are on the agency’s outline of the issues affecting credit unions contained in the Consolidated Appropriations Act, 2021 adopted by Congress Dec. 27 (letter 21-CU-01, issued by the agency the week of Jan. 4), and about NCUA’s Supervisory priorities for 2021 (letter 21-CU-02, issued by the agency last week).
The first letter notes that that most of the provisions of the consolidated appropriations bill extend portions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law last March as the impact of the coronavirus crisis became apparent. Those provisions are extended to Dec. 31, 2021, the letter notes. It also touches on provisions affecting the agency’s Central Liquidity Facility (CLF), troubled debt restructurings (TDRs), compliance with the Current Expected Credit Loss (CECL) accounting standard and more.
The second letter outlines the broad scope of the agency’s regulatory priorities for 2021, primarily focusing on challenges to credit unions posed by the ongoing coronavirus pandemic and steps to enhance the agency’s offsite monitoring of credit unions’ conditions. Additionally, the letter states that examiners will not be assessing credit unions’ efforts to transition to the CECL standard “until further notice.”
The summary of the regulatory alert (21-RA-01), released by NCUA earlier this month, outlines the agency’s view of CFPB’s action late last year to issue two final rules amending the Ability-to-Repay/Qualified Mortgage Rule (ATR/QM Rule) in Regulation Z. The final rules would replace the 43% debt-to-income (DTI) ratio limit with price-based thresholds (under the bureau’s general QM final rule), and create a new category of qualified mortgage (known as the seasoned QM final rule).
LINKS:
NASCUS Summary: LTCU 21-CU-01, Summary of the Consolidated Appropriations Act 2021 (members only)
NASCUS Summary: LTCU 21-CU-02, NCUA’s Supervisory Priorities (members only)
NASCUS Summary: Regulatory Alert 21-RA-01: CFPB Amends Ability-to-Repay/QM Rule under TILA (members only)
(Nov. 13, 2020)Despite the financial impact of the coronavirus crisis, federally insured credit unions performed well and remain well capitalized – although there are still challenges ahead, NCUA Board Chairman Hood told Senate and House committees this week.
Hood also made a legislative request: that the authority in the Coronavirus Aid, Relief, and Economic Security (CARES) Act given to NCUA to respond to the pandemic – particularly that providing expanded flexibility and borrowing authority to the agency’s Central Liquidity Facility (CLF) – should be extended to the length of the pandemic. The authority under the CARES Act is now set to expire at year’s end.
In reporting on the state of credit unions, Hood said they were well capitalized at the start of the pandemic, with high levels of net worth and ample liquidity. He noted that federally insured credit unions (FICUs) increased their net worth by $11.6 billion, or 6.8%, over the year ending June 2020, to $182.9 billion. He said asset growth led to a decline In the aggregate net worth ratio – net worth as a percentage of assets – from 11.27% to 10.46%. “Still, the credit union system remains well capitalized through June 2020,” Hood said.
But he also reported that the effects of the economic downturn will affect credit union performance through year’s end and into 2021. “System-wide delinquency rates, which remained low through the second quarter, could begin to rise as forbearance programs end, particularly given the current high level of unemployment. Interest rates across the maturity spectrum have fallen to historically low levels,” he said. “A prolonged period of low interest rates also poses risks, particularly to credit unions that rely primarily on investment income.”
NCUA is actively monitoring economic conditions and assessing these and other risks to credit unions and their members, he said.
In seeking extended authority for the CLF, Hood noted a number of changes the CARES Act made for the CLF when the law was enacted last March (including higher borrowing authority, relaxed membership for corporate CUs, more clarity about what borrowed funds can be used for). He indicated credit unions have responded well to the changes, with new memberships adding $989.8 million in additional capital stock (since April), borrowing authority increased by $21.7 billion to $32.2 billion, and 80% of all federally insured credit unions (4,145 in total) now having access to the facility.
Securing the extension of the authorities, Hood said, would “provide regulatory certainty to credit unions. Having a reinforced CLF will also ensure the credit union system can continue to support its members and communities should the need for emergency liquidity arise.”
NASCUS commented in favor of changes to the CLF in a comment letter on an interim final rule the association filed in June, implementing provisions of the CARES Act.