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