April 21, 2023

NCUA Board issues RFI on climate risk, gets legal analysis of interest rate ceiling

NCUAThe NCUA Board held its April meeting yesterday to discuss the agency’s analysis of federal credit unions’ permissible interest rate ceiling. NAFCU has consistently advocated for a floating interest rate ceiling to help mitigate interest rate risk during a difficult economic environment. The NCUA’s Office of General Counsel noted during the briefing that it’s “reasonable” to determine the Federal Credit Union Act allows for implementing a floating interest rate ceiling.

The board also received insights into the implications related to unsecured lending, economic data, and the industry’s safety and soundness should the ceiling be reverted to 15 percent. Agency staff highlighted that a 15 percent ceiling would have serious impacts on credit unions struggling with liquidity or that have a high concentration of loans with rates above the ceiling.

No action was taken on the interest rate ceiling; the board in January approved extending the 18 percent ceiling for another 18 months. NAFCU will continue to fight to ensure credit unions have the flexibility needed to lend effectively and manage risks.

Additionally, the NCUA Board approved publishing a request for information (RFI) on current and future climate and natural disaster risks to credit unions. The RFI will also help guide agency regulations, reporting requirements, and supervisory approaches for credit unions’ management of climate-related risk.

The NCUA Board also received an update on cybersecurity threats, the agency’s Information Security Examination (ISE) program, and its cybersecurity resources for credit unions. NCUA staff remarked that ransomware attacks had slowed down in 2022 and cybercriminals earned less money from these attacks as compared with 2021.

NAFCU will continue to remain engaged with the NCUA on credit union priorities, including continued advocacy for a floating interest rate ceiling.