Removing Barriers Blog

Recap: NCUA July Board Meeting
Posted July 30, 2020 by CUNA Advocacy

Today, the NCUA Board approved a final rule for field of membership and proposed rules for transition to CECL methodology and fees paid by FCUs. The Board also approved a request for comment on the overhead transfer rate and operating fee methodologies. Lastly, the Board was briefed on NCUA’s 2020 mid-session budget.  

Final Rule, Part 701, Appendix B, Chartering and Field of Membership 
The final rule re-adopts a provision to allow an applicant to designate a Combined Statistical Area (CSA), or an individual, contiguous portion thereof, as a well-defined local community (WDLC), provided that the chosen area has a population of 2.5 million or less. The final rule also addresses an August 2019 opinion and order issued by the D.C. Circuit Court of Appeals with respect to communities based on a Core-Based Statistical Area (CBSA) or a portion thereof, the rule provides further explanation and support for the elimination of the requirement to serve the CBSA’s core area, as provided for in a 2016 final rule. The rule also clarifies existing requirements and adds an explicit provision to the FOM rules to address concerns about potential discrimination in the FOM selection process for CSAs and CBSAs.  

Proposed Rule, Part 702, Transition to CECL Methodology 
The NCUA Board proposed changes to the generally accepted accounting principles (GAAP). The proposed rule would phase-in the day-one adverse effects on regulatory capital that may result from the adoption of the current expected credit loss (CECL) accounting methodology. NCUA will phase-in the day-one effects on a FICU’s net worth ratio over a three- year period to determine a credit unions net-worth classification for prompt corrective action. The proposed rule would also allow eliminate the requirement  credit unions with less than $10 million in assets determine their charges for loan losses in accordance with GAAP but will instead use any reasonable reserve methodology, provided that it adequately covers known and probable loan losses.  

Proposed Rule, Part 701.6, Fees Paid By FCUs 
The proposed rule would amend the NCUA’s regulation governing assessment of an annual operating fee to federal credit union.  To address loans made under the Small Business Administration’s Paycheck Protection Program (PPP), proposed rule would amend the current would exclude from total assets any PPP loan. The proposed rule would also amend the period used for the calculation of an FCU’s total assets. 

Request for Comment, Overhead Transfer Rate and Operating Fee Methodologies 
The NCUA Board is inviting comment on the methodology use to calculate the existing overhead transfer rate (OTR) but is not proposing any changes at this time.  The Board is requesting comment on proposed changes to the methodology it uses to determine how it apportions operating fees charged to federal credit unions. the Board proposes: (1) clarifying the treatment of capital project budgets when calculating the operating fees; (2) clarifying the treatment of miscellaneous revenues when calculating the operating fees; and (3) modifying the approach for calculating the annual inflationary adjustments to the thresholds for the operating fee rate tiers. 

Board Briefing, 2020 Mid-Session Budget 
The NCUA Board was briefed on the status of the budget at the midpoint for the year. The agency anticipates a small year-end surplus. The surplus is mainly due to a reduction in travel expensed due to COVID-19; however, the agency has seen a small increase in personnel expenses.