Removing Barriers Blog

NCUA Adopts Interim Final Rule PCA, Proposes Rule on Joint Ownership of Share Accounts

Today, the NCUA Board adopted an interim final rule on PCA, issued a proposal on joint ownership of share accounts, and received a briefing on the Share Insurance Fund. The Board failed to vote on an interim final rule that would have replaced the 45-day limit associated with repaying an overdraft with a requirement that credit unions establish a specific time limit (that is both reasonable and applicable to all members) for a member either to deposit funds or obtain an approved loan from the credit union to cover an overdraft. In expressing his concerns with the rule, Board Member Harper noted that the rule would fail to provide members with any real relief and also opposed the use of an interim final rule, rather than a proposed rulemaking; Board Member McWatters also questioned the use of an interim final rule. as he voted in opposition.

Chairman Hood noted that the NCUA will voluntarily follow the spirit of President Trump’s Executive Order issued earlier this week aimed at reducing burdensome regulatory requirements to help support economic recovery.

Proposed Rule – Joint Ownership Share Accounts (Part 745)

The Board issued a proposed rule to amend the NCUA’s regulation governing the requirements for a share account to be separately insured as a joint account. Specifically, the proposed rule would provide an alternative method to satisfy the membership card or account signature card requirement (signature card requirement). Under the proposal, the signature card requirement could be satisfied by information contained in the account records of the insured credit union establishing co-ownership of the share account, such as evidence that the credit union has issued a mechanism for accessing the account to each co-owner or evidence of usage of the share account by each co-owner.

The proposed change mirrors a recent change made by the FDIC.

NCUA will accept public comments on the proposal for 30 days following publication in the Federal Register.

Interim Final Rule – Prompt Corrective Action (Part 702)

The Board adopted an interim final rule aimed at reducing credit unions administrative burden associated with a temporary increase in shares. Specifically, the rule makes the following temporary changes to NCUA’s PCA regulations:

  1. Amends § 702.201 to temporarily enable the Board to issue an order applicable to all credit unions to waive the earnings retention requirement for those that are adequately capitalized.

In response to the pandemic and resulting economic disruption, the Board has determined that it is appropriate to amend § 702.201 to provide express regulatory authority for the Board to issue a single order waiving the earnings retention requirement for all adequately capitalized credit unions.

  1. Modifies § 702.206(c) with respect to the specific documentation required for net worth restoration plans (NWRP) for credit unions that become undercapitalized.

This change waives the NWRP content requirements for credit unions that become undercapitalized (those between 4% and 5.99%) predominantly as a result of share growth. In these cases, the credit union may submit a significantly simpler NWRP to the Regional Director noting that the credit union fell to undercapitalized because of share growth (and that such share growth is a temporary condition due to the COVID-19 pandemic).

Both of these changes will sunset on December 31, 2020.

Quarterly Report – Share Insurance Fund

Today’s report on the Share Insurance Fund showed total income of $77 million and net loss of $1.2 million for the quarter ending 3/31/2020. The balance sheet indicated total liabilities and net position of $17.687 billion, an increase of roughly $965 million from the previous quarter. The Fund’s reserve balance stands at $177.7 million as of the end of the first quarter, with $6.2 million being for specific reserves. The Fund’s equity ratio remains at 1.35%. The number of CAMEL Code 4/5 credit unions decreased slightly from the preceding quarter to 175; CAMEL Code 3 credit unions decreased to 812.