December 18, 2020

NCUA extends COVID relief, approves subordinated debt rule

NCUAThe NCUA Board Thursday approved all items on its agenda – including a final rule on subordinated debt and a proposed rule related to overdraft policy that was tabled during the board's May meeting – and received a briefing on the National Credit Union Share Insurance Fund's (NCUSIF) normal operating level (NOL), during which staff recommended it be kept at its current level of 1.38 percent.

The NCUA Board is also meeting today to consider a final rule on annual operating fee assessment, the agency's 2021-2022 budget, and a briefing on the agency's operating fee schedule and overhead transfer rate (OTR).

Here's a rundown of Thursday's board actions; NAFCU will issue Regulatory Alerts on the proposed rules to gather member credit unions' feedback:

  • Field of membership shared facility requirements proposed rule: The NCUA Board, on a 2-1 vote, approved issuing the proposed rule to modernize the definition of a "service facility" for multiple common bond (MCB) federal credit unions (FCUs). NAFCU has long advocated for this modernization to help credit unions grow and better serve their communities. The association supports further expansion of the service facility definition to include a credit union's website or mobile app. The proposal will be open for a 30-day public comment period once published in the Federal Register.
  • Regulatory relief in response to COVID-19 temporary final rule: The board unanimously approved extending to Dec. 31, 2021, regulatory relief related to loan participations that was initially approved in April. Under the rule, the maximum aggregate amount of loan participations that a federally-insured credit union (FICU) may purchase from an originating lender without a waiver was increased to $5 million or 200 percent of the FICU's net worth.
  • Subordinated debt final rule: The board unanimously finalized – largely as proposed – the rule to permit low-income designated credit unions (LICUs), complex credit unions, and new credit unions to issue subordinated debt for purposes of regulatory capital treatment. NAFCU generally supported the proposed rule and some of the association's sought changes were made in the final version; however, the final rule does not adopt more simplified procedural requirements for the application and offering process. NAFCU will continue to work to ensure that this rule does not increase regulatory burdens as it provides increased access to capital for credit unions. The rule will take effect Jan. 1, 2022.
  • Overdraft policy proposed rule: After tabling an interim final rule on this issue at the May meeting, the board on a 2-1 vote approved issuing a proposed rule to remove the requirement for FCUs to adopt as part of their written overdraft policy a time limit that cannot exceed 45 calendar days for a member to either deposit funds or obtain an approved loan from the FCU to cover each overdraft. NAFCU had advocated for this increased flexibility to help credit unions better serve members facing economic hardship due to the coronavirus pandemic. The proposal will be open for a 30-day public comment period once published in the Federal Register.
  • Mortgage servicing rights proposed rule: On another 2-1 vote, the board approved issuing a proposed rule to amend the agency's investment regulation to allow eligible FCUs to purchase the mortgage servicing rights of loans that the FCU is otherwise empowered to grant, provided the investments are safe and sound and align with the FCU's policies and procedures related to the risk of the investments and servicing practices. NAFCU will evaluate the proposal and offer comments, but is generally supportive of the increased mortgage servicing rights as it could be helpful for smaller institutions. The proposal will be open for a 30-day public comment period once published in the Federal Register.
  • Briefing on NCUSIF NOL: The board received a briefing that projected the NCUSIF's equity ratio will end the year at 1.32 percent – above the range at which the board is permitted to assess a premium. NCUA staff recommended the board maintain the NOL at its current 1.38 percent. NAFCU has opposed this NOL level and has urged the board to return it to its historic level of 1.3 percent. The association has also advised the agency against a premium assessment as credit unions have seen significant share growth amid the pandemic and advocated instead for additional investment authorities. The agency is expected to convene a working group next year to assess the methodology for setting the NOL and solicit comment during that process.

Stay tuned to NAFCU Today for updates from today's meeting.