On December 15, the NCUA Board held its final meeting of 2023. The Board was briefed on the Share Insurance Fund’s (SIF) Normal Operating Level, which will remain at 1.33%. The NOL was lowered to 1.33% from 1.38% at the end of 2021. The Board discussed inflation and the current rate environment during the briefing along with the potential impact these factors may have on the SIF in the coming months and years.

The Board was also presented with the proposed 2023-2024 NCUA Budget for a vote. The funding levels in the total 2023 draft budget would be reduced by $6.7 million. The original draft was posted to the NCUA website on September 29, 2022, with an identical version published in the Federal Register on October 5, 2022. The Board voted unanimously to approve the budget. Toward the end of the budget discussion, Chairman Harper inquired as to the impacts of the Financial Transparency Act on the NCUA Budget should NDAA pass. It was noted that should this pass, implementation would be a multi-year effort that NCUA would need to assess.

Finally, the Board unanimously approved a Proposed Rule, NCUA Parts 701 and 714, Financial Innovation – Loan Participation, Eligible Obligations, and Notes of Liquidating Credit Unions. The proposed rule would amend NCUA’s rules and regulations regarding the purchase of loan participations and the purchase, sale, and pledge of eligible obligations and other loans, including notes of liquidating credit unions. The proposed rule is also intended to clarify the NCUA’s current regulations while providing additional flexibility for federally insured credit unions to use advanced technologies and opportunities offered by FinTechs. The NCUA Board praised the proposed rule as a means to keep the NCUA relevant in this space and allow credit unions greater opportunities.

(Jan. 15, 2021) A final rule extending to Dec. 31, 2021 a temporary final rule on loan participations is the subject of the latest summary to be developed by NASCUS and posted on the association’s website.

The summary is available to members only.

At its Dec. 17 meeting, the NCUA Board approved (unanimously), an extension for a temporary final rule that increases the maximum aggregate amount of loan participations that a federally insured credit union (FICU) may purchase from a single originating lender without seeking a waiver from NCUA to the greater of $5 million or 200% of the FICU’s net worth (up from the greater of $5 million or 100% of the FICU’s net worth).

The rule had been slated to expire Dec. 31, 2020. The temporary rule, adopted by the NCUA Board as a relief measure for credit unions in the midst of the coronavirus crisis last spring, originally took effect April 21.

LINK:
Summary: Final rule, Temporary Regulatory Relief in Response to COVID-19 — Extension (members only)

(Dec. 18, 2020) In other action at Thursday’s meeting, the NCUA Board issued one final rule and three proposed regulations – with three of those approved on split votes after Board Member Todd Harper (the lone Democrat appointee on the board) voted in opposition all three times.

The board:

Approved (unanimously), an extension to Dec. 31, 2021 for a temporary final rule that increases the maximum aggregate amount of loan participations that a federally insured credit union (FICU) may purchase from a single originating lender without seeking a waiver from NCUA to the greater of $5 million or 200% of the FICU’s net worth (up from the greater of $500 million or 100% of the FICU’s net worth). The rule had been slated to expire at year’s end. The temporary rule, adopted by the NCUA Board as a relief measure for credit unions in the midst of the coronavirus crisis last spring, took effect April 21.
Issued a proposed rule (on a 2-1 vote) on field of membership shared facility requirements (under Part 701, Appendix B, of agency rules) that NCUA said is intended to modernize requirements related to service facilities for multiple common bond (MCB) federal credit unions (FCUs). NCUA said the proposal includes any shared branch, shared ATM, or shared electronic facility in the definition of “service facility” for an MCB FCU that participates in a shared branching network. “The FCU need not be an owner of the shared branch network for the shared branch or shared ATM to be a service facility,” the agency said. “These changes would apply to the definition of service facility both for additions of select groups to MCB FCUs and for expansions into underserved areas.” Harper said he questioned the proposal’s ability, without changes, to increase service to underserved areas. The proposal will have a 30-day comment period.
Released a second proposed rule (on a 2-1 vote), this one on mortgage servicing rights (under Parts 703 and 721 of agency rules), which would amend the agency’s investment regulation to permit FCUs to purchase mortgage servicing rights from other federally insured credit unions subject to certain conditions. Harper called the proposal “half baked,” but said he could find a way to support a final rule if changes were made. The proposal will be issued with a 30-day comment period.
Advanced yet a third proposed rule – this one on overdraft policy (under Part 701 of NCUA rules) – also on a 2-1 vote. The proposal would remove the requirement that an FCU’s written overdraft policy establish a 45-day time limit for a member to either deposit funds or obtain an approved loan from the FCU to cover each overdraft, and replace it with a requirement that the written policy must establish a specific time limit that is “both reasonable and applicable to all members for a member either to deposit funds or obtain an approved loan from the FCU to cover each overdraft.” In May, the board tabled a proposed interim final rule to let FCUs decide how long members have to resolve account overdrafts. The proposal was tabled after failing to win a second from one of two board members when Chairman Hood asked for it (both members Harper and McWatters expressed opposition to a final rule). Back in May, Harper said the rule would (among other things) allow credit unions to garnish members’ income – including any economic stimulus relief funds – to pay off overdraft debt. Harper reiterated his objections Thursday (“I couldn’t support it then, I can’t now,” he said). Comments are due 30 days after publication in the Federal Register.

The board also set the “normal operating level” for the National Credit Union Share Insurance Fund (NCUSIF) at 1.38 for the coming year, no change from 2020. The NOL represents the target level of reserves in the fund relative to shares insured (referred to as the equity level). Generally, it is the level of reserves the board believes is needed to deal with anticipated losses from credit unions (if any) throughout the year, without lowering the reserving rate below 1.20%, the point at which an insurance premium would be required.

Along those lines, staff told Board Member Harper that it estimates the equity level of the fund at year-end will be 1.32% — well above the level at which a premium would be required. Agreeing with staff that chances of a premium in 2021 now look “next to zero,” Harper said that would be “welcome news to many credit unions.”

LINKS:
Temporary Final Rule, Regulatory Relief in Response to COVID-19

Proposed rule, Field of Membership Shared Facility Requirements

Proposed Rule, Mortgage Servicing Rights

Proposed Rule, Part 701, Overdraft Policy.

Board Briefing, Share Insurance Fund 2021 Normal Operating Level

NASCUS Summary: December 2022 NCUA Board Meeting