October 16, 2020

NCUA finalizes corporate CU rule, proposes changes to derivatives rule, more

NCUAThe NCUA Board Thursday approved a final rule updating its corporate credit union rules and a proposed rule to amend the agency’s derivatives rule in subpart B to part 703 of its regulations. Of note, the board voted to remove the fourth item – a request for information on the agency’s supervisory guidance and communication improvements – from the meeting agenda.

Board briefing

In light of National Cybersecurity Awareness Month, the board was briefed on coronavirus-related cyber-attacks, including phishing, ransomware, and other means, that seek to exploit inadequacies in cyber hygiene policies and procedures. The board went on to reiterate its strong support for legislative authority to allow the NCUA to examine third-party vendors following pandemic recovery.

NAFCU has historically opposed granting the NCUA third-party vendor authority.

Final rule, corporate credit unions

The board approved the NAFCU-supported final rule updating its corporate credit union rules to permit a corporate credit union to make a minimal investment in a CUSO without the CUSO being classified as a corporate CUSO. In addition, the rule expands the categories of senior staff that may serve on a corporate credit union board and amends the requirements for a corporate credit union’s enterprise risk management expert.

NAFCU submitted a comment letter to the agency earlier this year following the board's proposal at its February meeting and offered support for the agency’s effort to provide greater flexibility and ease regulatory burden. 

Proposed rule, derivatives

On derivatives, the board approved a proposed rule to adopt a more principles-based approach to provide credit unions with more flexibility to manage their interest rate risk through the use and purchase of derivatives. In addition, the proposal would:

  • eliminate the preapproval process for federal credit unions (FCUs) that are complex and have a CAMEL rating of 1 or 2;
  • eliminate the specific product permissibility; and
  • eliminate the regulatory limits on the amount of derivatives an FCU may purchase.

In 2014, the NCUA Board issued a final rule to allow federal credit unions the ability to apply to use derivatives in an effort to reduce interest rate risk.

NAFCU will continue to stay in close contact with the NCUA and continue to provide industry updates to credit unions via NAFCU Today; the board will next meet Nov. 19.