October 06, 2020

NAFCU's Berger, NCUA's Harper discuss top CU priorities

NCUANAFCU President and CEO Dan Berger met with NCUA Board Member Todd Harper Monday to discuss several top credit union priorities, including the National Credit Union Share Insurance Fund (NCUSIF), field of membership (FOM), credit unions’ capitalization of interest, and more. NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt and Director of Regulatory Affairs Ann Kossachev also attended the meeting.

On the NCUSIF, Berger discussed the association's advocacy related to the NCUA's management of the NCUSIF and credit union investment authority. Recently, NAFCU Vice President of Research and Chief Economist Curt Long advised the NCUA Board to consider measures to allow credit unions additional investments – even on a temporary basis – rather than assess a premium to lower the ratio.

In addition, members of NAFCU’s Share Insurance Fund (SIF) Committee heard directly from NCUA Chief Financial Officer Eugene Schied on this topic during the committee’s October meeting.

The group went on to discuss credit unions’ capitalization of interest under Appendix B to Part 741. In September, NAFCU Board of Directors Chair Debra Schwartz, president and CEO of Mission Federal Credit Union (San Diego, Calif.), and NAFCU's Regulatory Committee called on the NCUA to "act quickly to issue an interim final rule [IFR] permitting credit unions to capitalize interest" when it comes to troubled debt restructurings (TDRs) and loan modifications.”

In the letter, Schwartz and the committee detailed the options currently available to credit unions once forbearance ends, but argued that they "are not beneficial for the borrower or the institution." Read the full letter here.

In addition, the group discussed the NCUA’s service facility definition as it relates to FOM, including how this affects credit unions’ ability to designate additions of select groups and/or underserved areas.

On stress testing and capital planning, NAFCU addressed the Federal Reserve’s updated hypothetical scenarios to use in 2020 stress test exercises and the agency’s approach to credit unions who have seen large share growth but are not subject to prompt corrective action. The NCUA Board during its May meeting unanimously approved an interim final rule on prompt corrective action (PCA) to provide temporary regulatory capital relief to federally-insured credit unions (FICUs). Earlier this year, NAFCU urged the agency provide capital relief during the pandemic, including changes to PCA requirements.

Finally, the NCUA’s move to the Modern Examination and Risk Identification Tool (MERIT) was discussed. As the agency revised its 2020 supervisory priorities in July to account for the coronavirus pandemic, it indicated MERIT would be slightly delayed and fully rolled out in the second half of 2021 rather than later this year.

NAFCU supports the NCUA's exam modernization efforts. As the agency considers moving toward a more virtual exam, NAFCU has encouraged the agency to prioritize consistency and transparency in the exam process. The association also has a complimentary webinar available on-demand reviewing the transition to MERIT and a virtual exam program.

NAFCU will continue to remain in close contact with the NCUA to inform credit unions of the latest developments.