December 17, 2021

NCUA Board approves 2022-2023 budget, NOL policy; issues 3 final rules

NCUAThe NCUA Board Thursday unanimously approved its final 2022-2023 budget, incorporating several of NAFCU's recommendations to achieve year-over-year budget reductions. In addition, the board approved the National Credit Union Share Insurance Fund (NCUSIF) normal operating level (NOL) policy and set the NOL at 1.33 percent.

The final 2022-2023 budget was reduced by $5.9 million and 46 full-time equivalents. In addition, the board reduced its travel budget by $2.7 million, or about 10 percent when compared to the initial budget proposal.

NAFCU Vice President of Regulatory Affairs Ann Kossachev last week participated in the agency’s public budget hearing and sent a letter outlining shared credit union concerns and recommendations on how to tailor the budget to be more cost-effective.

On the NOL, NAFCU continues to request that the NCUA return the NOL to its historic level of 1.30 percent.

During the meeting, the board also approved three final rules:

Complex Credit Union Leverage Ratio (CCULR): The board unanimously approved the finalized CCULR rule, which adopts a CCULR of 9 percent and forgoes a transition provision that would have increased the CCULR to 10 percent. The final CCULR rule also allows credit unions to opt out of the framework without providing notice.

In addition, the board adopted NAFCU-sought changes to the CCULR rule and the risk-based capital (RBC) rule regarding the treatment of goodwill and excluded other intangible assets as part of the calculation for the 2 percent eligibility requirement for the CCULR. The RBC rule has also been amended to permanently grandfather excluded goodwill and excluded other intangible assets.

NAFCU strongly advocated for several recommended changes to be made to the CCULR to ensure it offers meaningful capital relief for credit unions.

Mortgage Servicing Assets (MSA): The board unanimously approved the MSA – formerly known as mortgage servicing rights – final rule allowing federal credit unions (FCU) with a CAMEL or CAMELS composite rating of 1 or 2 and a CAMEL or CAMELS management component rating of 1 or 2 to purchase the MSRs of loans that are:

  • a purchase the FCU is otherwise empowered to grant
  • made in accordance with the FCU's policies and procedures to address risk; and
  • previously approved in advance by FCU's board of directors.

NAFCU sent a letter to the NCUA to offer support for the initial MSR proposal.

Subordinated Debt: The board unanimously approved the subordinated debt final rule to ament the definition of "grandfathered secondary capital" to include secondary capital issued to the U.S. Government or one of its subdivisions under an application approved before Jan. 1, 2022. Of note, this rule will benefit low-income credit unions participating in the Treasury Department's Emergency Capital Investment Program (ECIP). Currently the final rule extends the expiration of regulatory capital treatment to the later of 20 years from the date of issuance or Jan. 1, 2042.

The association offered support for the proposal; however, the association stated it does not support a maximum maturity for ECIP investments that truncates the useful life of the funding as regulatory capital. NAFCU will continue to advocate that the ECIP address the regulatory capital treatment of 30-year ECIP investments.

Stay tuned to NAFCU Today for the latest on the NCUA.