Removing Barriers Blog

NCUA Proposes Corporate Rule, Finalizes Allowances for Credit Losses Policy Statement
Posted February 20, 2020 by CUNA Advocacy

Today, the NCUA Board issued a proposal on corporate credit unions, adopted a final policy statement on allowances for credit losses, and received briefings on credit union mortgage rates and the Share Insurance Fund. The Board welcomed members of the New York Taxi Workers Alliance attending the meeting.

Proposed Rule – Corporate Credit Unions (Part 704)

The Board issued a proposed rule intended to update, clarify, and simplify several provisions of the corporate credit union regulation. Specifically, the proposal would:

  • Permit a corporate credit union to make a minimal investment in a CUSO without the CUSO being classified as a corporate CUSO under NCUA’s rules;
  • Expand the categories of senior staff positions at member credit unions eligible to serve on a corporate’s board;
  • Amend the minimum experience and independence requirement for a corporate’s enterprise risk management expert; and
  • Require a corporate to deduct certain investments in subordinated debt instruments issued by natural person credit unions.

NCUA will accept public comments on the proposal for 60 days following publication in the Federal Register.  

Final Policy Statement – Allowances for Credit Losses

The Board adopted an interagency policy statement on allowances for credit losses in response to changes to U.S. GAAP pertaining to the measurement of expected credit losses under FASB’s CECL methodology. Specifically, the statement addresses: supervisory expectations for documenting and validating expected credit loss estimation processes; responsibilities of boards of directors and management; and examiner reviews of allowances for credit losses.

In December, CUNA sent a comment letter to NCUA largely in support of the then-proposed policy statement.

Staff mentioned it is continuing to work on a proposed rulemaking to provide a three-year phase in of CECL for regulatory capital purposes. Staff is hopeful such a standard will be proposed by the second or third quarter of this year and potentially finalized by year-end. However, Board Members Harper and McWatters stated the importance of such relief and encouraged a shorter timeframe for the rulemaking.

Staff also mentioned the agency will be launching a CECL webpage later this year that will include links to resources from NCUA and others.

Board Briefing – Credit Union Mortgage Rates

The Board received a briefing on an agency analysis of 2018 mortgage originations, which compares interest rates and loan characteristics for loans originated by credit unions and other financial institutions.

The analysis, based on 2018 HMDA data, evaluated 30-year conventional fixed-rate, first-lien loans for one-unit, owner-occupied properties. The research determined that mortgage loans originated by credit unions generally carried lower interest rates than mortgage loans originated by other lenders, which could result in thousands of dollars in savings for credit union member-borrowers.

Quarterly Report – Share Insurance Fund

Today’s report on the Share Insurance Fund indicated total income of $78.6 million and net loss of $50.5 million for the quarter ending 12/31/2019. The balance sheet showed total liabilities and net position of $16.722 billion, an increase of roughly $875 million from 12/31/2018. The Fund’s equity ratio stands at 1.35% as of the end of the last quarter. The number of CAMEL Code 4/5 credit unions decreased slightly from the preceding quarter to 190; CAMEL Code 3 credit unions decreased to 838. During all of 2019 there were only two credit union failures; this compares to eight failures during 2018.