Compliance Blog

Jul 29, 2015
Categories: Board and Governance

NCUA Board Approves Final Rule on Fixed Assets

Written by Victoria Daka, Regulatory Compliance Counsel

In NCUA’s most recent Board meeting, the NCUA Board approved a final rule providing regulatory relief to thousands of federal credit unions by eliminating certain provisions in the agency’s fixed-assets rule. The final rule amending the fixed-asset rule makes three changes.

First, and most notably, the final rule eliminates the five-percent cap on investments in fixed assets. In other words, credit unions are now relieved from the requirement of obtaining a waiver to exceed the current five-percent aggregate limit on investments in fixed assets. The rule defines fixed assets as “premises, furniture, fixtures, and equipment, including any office, branch office, sub office, service center, parking lot, facility, real estate where a credit union transacts or will transact business, office furnishings, office machines, computer hardware and software, automated terminals, and heating and cooling equipment.” However, the preamble to final rule reiterates that examiners would reserve the right to supervise federal credit unions investment levels in fixed assets. Thus, the final rule shifts the agency's focus on this area from regulation to the supervisory process.

Second, the final rule establishes a single six year time period for partial occupancy of any premises acquired for future expansion, starting from the date of acquisition.  Under the current rule, a federal credit union must show that it will fully occupy the premises within a reasonable time by requiring the federal credit union’s partial occupancy of the premises within a time period set by the rule.  The rule sets a distinction in the requirements between improved and unimproved property. Specifically, for improved premises acquired for future expansion, a federal credit union is currently permitted up to three years from the date it obtains the property to meet the partial occupancy requirement, unless NCUA grants a waiver.  And for unimproved land or unimproved real property, a federal credit union has six years from the date of acquisition. The final rule, however, permits federal credit unions up to six years from the date of acquisition to meet the partial occupancy requirement, regardless of whether the premises are improved or unimproved property.

Third, the final rule eliminates the requirement that a federal credit union apply for a waiver from the partial occupancy rules within thirty months of acquisition. Instead, the final rule allows federal credit unions to apply for a waiver at any time, as appropriate.

The final rule, available online here, will become effective 60 days after publication in the Federal Register. Additionally, the NCUA has indicated that it is working on supervisory guidance to be issued to NCUA examiners before this final rule is implemented.