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NCUA finalizes corporate CU rule, seeks feedback on RBC requirements, more
The NCUA Board Thursday held its first meeting of 2021 and approved three proposed rules, an advance notice of proposed rulemaking (ANPR), and a final rule that are related to several credit union hot topics – including risk-based net worth requirements for "complex" credit unions and risk-based capital requirements.
Proposed rule, risk-based net worth
In a 2-1 vote, the board issued a proposed rule to provide that the risk based net worth requirements for “complex” credit unions applies only to federally-insured credit unions with quarter-ends assets exceeding $500 million and a risk based net worth requirement that exceeds six percent until the Jan. 1, 2022 effective date of the final risk-based capital (RBC) rule.
NAFCU is generally supportive of changes to capital requirements as they will provide relief to credit unions amid the coronavirus pandemic.
ANPR, risk-based capital requirements
The ANPR, approved by a 2-1 vote, seeks to gather feedback on two approaches to simplifying the RBC rule, which include:
- replacing the RBC rule with a risk-based leverage ratio (RBLR), which uses risk attribute thresholds to define “complex” credit unions; and
- adopting a complex credit union leverage ratio (CCULR) which would leave the 2015 RBC rule unchanged but allow eligible complex federally-insured credit unions to opt-in to the CCULR to meet the RBC requirements.
The NCUA in 2019 approved delaying the implementation of its RBC rule by two years to Jan. 1, 2022, and NAFCU has led efforts to ensure credit unions and their members benefit from a modern capital regime, working closely with policymakers on Capitol Hill and at the agency. NAFCU supports amendments to the RBC rule and has asked the agency to adopt a community bank leverage ratio, similar to the CCULR included in the ANPR.
NAFCU has also requested that the NCUA permanently grandfather "excluded goodwill" and "excluded other tangible assets" in the RBC calculation and will continue to encourage the agency to design a true risk-based capital system for credit unions.
Proposed rule, credit union service organizations (CUSOs)
The board approved a proposed rule to permit CUSOs to originate any type of loan that a federal credit union may originate and grant the agency with additional flexibility to approve permissible activities and services. NAFCU has previously supported additional authorities that would allow a CUSO’s owners to grow and will evaluate the proposal further to ensure it does not impose complex compliance requirements or additional burdens.
Proposed rule, CAMELS rating system
The board unanimously approved a proposed rule to add the “S” component – which stands for sensitivity to market risk – to the CAMEL rating system. In addition, the proposal includes a redefining of the “L” component – which stands for liquidity risk – to enhance transparency, allow the agency and state regulators to better distinguish between the two components, and align with bank regulators. The board indicated that the changes may be implemented as early as Q1 of 2022.
Final rule, corporate credit unions
With unanimous approval, the board finalized a rule to allow corporate credit unions to purchase certain investments in subordinated debt instruments issued by natural person credit unions. This rule is related to a previous rule on subordinated debt – finalized last month – as well as another final rule on corporate credit unions which was finalized in October.
NAFCU shared support for this provision following the agency’s initial proposal to amend the agency's corporate credit union rules and will continue to urge the NCUA to consider additional relief efforts that would leverage the strength of corporate credit unions to support continued growth and stability within the credit union industry.
During the meeting, the board received three board briefings:
- the agency’s recently launched Advancing Communities through Credit, Education, Stability, and Support (ACCESS) Initiative;
- the Consolidated Appropriations Act of 2021 and extension of relief provided by the CARES Act and the enhancements made to the Central Liquidity Facility (CLF); and
- the amendments to the statutory inflation adjustment of civil monetary penalties (CMP) approved by the board on Dec. 30, 2020 by notation vote.
In addition, the board unanimously approved the agency’s 2021 Annual Performance Plan – which had been developed alongside the 2021-2022 budget.
Stay tuned to NAFCU Today for the latest on the NCUA. NAFCU will detail the proposed and final rules in upcoming alerts to members.
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