May 22, 2020

NCUA approves NAFCU-sought changes to PCA requirements

NCUAThe NCUA Board during its meeting yesterday 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.

“NAFCU supports the NCUA’s decision to adjust the prompt corrective action rules to account for current economic uncertainty and we thank NCUA Chairman Rodney Hood, and Board Members Todd Harper and J. Mark McWatters for voting in favor of the rule,” said NAFCU Director of Regulatory Affairs Ann Kossachev. “While the industry is safe and sound, it is imperative that credit unions have an environment where they can continue to focus their efforts on assisting members in financial need and managing their operations without grappling with administrative burdens.”

The interim final rule will temporarily:

  • permit the board to issue an order to temporarily waive the earnings retention requirement for any federally-insured credit union that is classified as adequately capitalized; and
  • permit federally-insured credit unions to submit simplified net worth restoration plans and attest that its reduction in capital has been caused by share growth resulting from a temporary condition due to the coronavirus pandemic.

These modifications will be in place until Dec. 31, 2020.

The board also introduced but did not approve an interim final rule on overdraft policy. Harper and McWatters raised concerns about the interim final rule and did not vote to approve.

NAFCU President and CEO Dan Berger has called on the NCUA to provide relief measures aimed to simplify the regulatory hurdles associated with limitations on carrying and charging off negative balances in a letter requesting additional regulatory relief due to the pandemic.

The association will continue to advocate for a change to the agency’s regulatory requirement for carrying and charging off negative balances.

In addition, the board proposed a rule on joint ownership share accounts that provides parity with changes made for banks by the FDIC in 2019. Under the rule, FICUs may use information in account records establishing co-ownership of the share account to satisfy the signature card requirement. The proposed rule will have a 30-day comment period.

The board was also briefed on the National Credit Union Share Insurance Fund (NCUSIF). NCUA staff reported that the equity ratio is currently at 1.35 percent and the normal operating level (NOL), as of December 2019, remains at 1.38 percent. The equity ratio will next be updated June 30.

The NCUSIF recorded a net income of $1.2 million for the first quarter of 2020. However, because the first quarter ended on March 31, there are no effects of the coronavirus pandemic reflected in this first quarter report.

The board will next meet June 25.