Board Briefing – ACCESS Initiative

The Board was briefed on the ACCESS (Advancing Communities through Credit, Education, Stability & Support) Initiative, which was first announced by Chairman Hood last October. ACCESS is intended to bring together agency leaders to develop policies and programs that support financial inclusion within the NCUA and more broadly, throughout the credit union system. ACCESS will expand existing efforts to address the financial services and financial literacy needs of underserved and diverse communities, as well as expand opportunities for employment.

Staff provided an update on the early efforts under each pillar of ACCESS. Going forward, the agency plans to obtain stakeholder input through a formal request for information. Also, as a part of the 2021 NCUA Strategic Indicators, ACCESS must report its progress on a quarterly basis.

Board Member Harper asked staff to follow the lead of the FDIC and look into developing a process whereby a minority depository institution seeking to merge with another minority institution is given extra time to review the books and develop a bid.

Vice Chairman Hauptman asked staff how the agency can better communicate to the public the process necessary to charter a de novo credit union. Staff offered some suggestions and mentioned that ACCESS is looking into this issue.

Proposed Rule – Credit Union Service Organizations (Part 712)

In a 2-1 vote, with Board Member Harper dissenting, the Board issued a proposal to amend the CUSO regulation with the objectives to:

• Expand the list of permissible activities and services for CUSOs to include originating any type of loan that an FCU may originate; and
• Grant NCUA additional flexibility to approve permissible activities and services.

Currently, CUSOs are generally limited to business lending, consumer mortgage lending, student lending, and credit cards.

Board Member Harper stated his opposition to the proposed expansion of CUSO authority, particularly since the agency lacks third-party vendor authority. Harper shared his concern that such expansion would “create a wild west within the credit union space,” with little accountability for protecting consumers.

The NCUA will accept comments for 30 days following publication in the Federal Register.

Final Rule – Statutory Inflation Adjustment of Civil Monetary Penalties (Part 747)

The Board adopted a final rule amending its regulations to adjust the maximum amount of each civil monetary penalty within its jurisdiction to account for inflation. This change is required by statute.

Final Rule – Corporate Credit Unions (Part 704)

The Board adopted a final rule amending the corporate credit union regulation to make clear that corporate credit unions may purchase subordinated debt instruments issued by natural person credit unions. The final rule also specifies the capital treatment of these instruments for corporate credit unions that purchase them.

This final rule resolves an issue addressed in the subordinated debt proposal. This final rule will become effective January 1, 2022.

Proposed Rule – CAMELS Rating System (Parts 700, 701, 703, 704 and 713)

The Board issued a proposal to add the “S” (Sensitivity to Market Risk) component to the existing CAMEL rating system and redefine the “L” (Liquidity Risk) component. The existing CAMEL rating process addresses both sensitivity to market risk and liquidity risk within the “L” component.

The proposed addition of the “S” component is intended to enhance transparency and allow the NCUA, SSAs, and credit unions to better distinguish between liquidity risk and sensitivity to market risk. The amendment would also enhance consistency between the regulation of credit unions and other financial institutions.

The NCUA expects that adopting a sixth CAMELS rating component will not have any adverse effect on a credit union’s CAMEL composite rating. The estimated implementation of this proposal is approximately one year or as early as the first quarter of 2022.

The NCUA will accept comments for 60 days following publication in the Federal Register.

Proposed Rule – Risk Based Net Worth, Complex Threshold (Part 702)

In a 2-1 vote, with Board Member Harper dissenting, the Board issued a proposal to raise the asset threshold for defining a credit union as “complex” for purposes of being subject to any risk-based net worth requirement.

Specifically, the proposed rule would amend NCUA’s regulations to provide that any risk-based net worth requirement would apply only to credit unions with more than $500 million in assets (currently $50 million) and a risk-based net worth requirement that exceeds 6%. The proposed threshold increase would remain in place until the January 1, 2022, effective date of the RBC rule.

In stating his opposition to the proposal, Board Member Harper cited several concerns, including that the proposal would weaken capital standards in the middle of economic turmoil.

The NCUA will accept comments for 30 days following publication in the Federal Register.

NCUA’s 2021 Annual Performance Plan

The Board approved the 2021 Annual Performance Plan, which provides specific direction and guidance toward achieving the goals and objectives of the NCUA’s 2018-2022 Strategic Plan.

The 2021 Plan was developed simultaneously with the 2021-2022 budget. The Plan sets out performance indicators and associated targets in support of the goals outlined in the agency’s Strategic Plan and draws a clear line from the agency’s mission to the strategic goals, strategic objectives, performance goals, and performance indicators and targets. This plan also describes the means, strategies and specific actions the agency has resourced and intends to undertake to achieve each strategic objective.

Board Briefing – Consolidated Appropriations Act, 2021

The Board was briefed on the Consolidated Appropriations Act.

Staff explained how several provisions of the CARES Act, that were set to sunset on 12/31/2020, were extended by the Consolidated Appropriations Act until 12/31/2021. In particular, the Consolidated Appropriations Act extends the effective date for the enhancements to the CLF.

These statutory changes supersede regulatory changes the agency made in light of the CARES Act. Staff noted that the agency may issue another rulemaking in order to update the CLF regulation to reflect the new sunset date.

The agency recently issued a letter to credit unions providing a summary of the Consolidated Appropriations Act. Further, an overview of the Act was recently posted to the CUNA Compliance Blog.

ANPR – Simplification of Risk Based Capital Requirements (Part 702)

In a 2-1 vote, with Board Member Harper dissenting, the Board issued an advance notice of proposed rulemaking (ANPR) to solicit comments on two approaches to simplify its RBC requirements.

• The first approach would replace the RBC rule with a Risk-based Leverage Ratio (RBLR) requirement, which uses relevant risk attribute thresholds to determine which complex credit unions would be required to hold additional capital (buffers).
• The second approach would retain the 2015 RBC rule but enable eligible complex credit unions to opt-in to a “complex credit union leverage ratio” (CCULR) framework to meet all regulatory capital requirements. The CCULR approach would be modeled on the Community Bank Leverage Ratio framework, which is available to certain banks.

  The NCUA will accept comments for 60 days following publication in the Federal Register