June 19, 2020

Exams, risk-based net worth, more on NCUA agenda

ncuaThe NCUA Board next week is set to issue a request for information related to the future of exams and supervision using digital technology, a final rule on technical amendments, and a proposed rule on risk-based net worth. Additionally, the board will receive a briefing on the agency's guaranteed notes oversight program and an annual report on minority depository institutions (MDIs).

Exams and Supervision

In its annual report released in March, the NCUA indicated it will continue its efforts on exam modernization, in addition to addressing growing cyber threats and technology-driven changes to the financial landscape. NAFCU has consistently pushed the NCUA for updates on exam modernization and met directly with NCUA Chairman Rodney Hood and Board Member Todd Harper to discuss the agency’s efforts to improve exams.

Last month, the NCUA provided credit unions with an update on exam relief efforts amid the coronavirus pandemic via a Letter to Credit Unions, indicating that it would continue offsite work until further notice. The agency also reiterated that it would consistently reevaluate this approach throughout the year and encouraged credit unions experiencing difficulties meeting examination requests to proactively reach out to their examiners

NAFCU President and CEO Dan Berger previously called on the agency to provide additional examination flexibility and make other regulatory adjustments to ensure credit unions can focus on helping members during the coronavirus pandemic. He also discussed exam relief in conversations with Hood, Harper and Board Member J. Mark McWatters

Risk-Based Net Worth

NAFCU previously urged the agency to grant additional capital flexibility and provide parity with banks amid the coronavirus pandemic and has led efforts to ensure credit unions and their members benefit from a modern capital regime.

Last year, the  NCUA Board passed a final rule to delay the implementation of its risk-based capital (RBC) rule by two years to Jan. 1, 2022.

Under the CARES Act, the community bank leverage ratio (CBLR) was reduced from 9 to 8 percent. One of NAFCU's priorities related to capital is to advocate for fair, common-sense capital reform that accurately recognizes risk, instead of just focusing on an institution's asset size, and enhances opportunities for credit union growth. The NCUA has previously indicated it is still working on efforts to create a CBLR analog for credit unions that will be subject to the RBC rule.

Of note, the tabled interim final rule on overdraft policy from the Board's May meeting is not on the agenda. NAFCU was generally supportive of the rule and had called on the agency to provide relief measures aimed at simplifying regulatory hurdles associated with limitations on carrying and charging off negative balances.

NAFCU will monitor next week's meeting and update credit unions via NAFCU Today. The board will next meet July 16; view the 2020 meeting dates.