WASHINGTON–CUNA and its affiliated state leagues have sent a joint letter to members of the NCUA board seeking additional relief for those credit unions facing prompt corrective action (PCA) as a result of declining net worth ratios due to share growth.
Separately, CUNA announced its political action committee, CULAC, has resumed making political contributions to federal legislative candidates.
In its letter to NCUA, CUNA acknowledges that in May of 2020 the board provided relief via an interim final rule (IFR) that included:
- Permitting the NCUA Board to issue an order to temporarily waive the earnings retention requirement for any credit union classified as adequately capitalized;and
- Permitting credit unions to submit simplified net worth restoration plans if the reduction in capital was caused by share growth resulting from a temporary condition due to the pandemic.
But that relief expired at year-end 2020.
CUNA and the leagues are asking the agency to adopt an IFR essentially identical to the 2020 IFR adopted last year that provided relief to credit unions experiencing PCA issues related to an increase in share growth.
“The relief should remain in effect until the end of the pandemic as determined by the Centers for Disease Control (CDC) or other federal entity authorized to make such a determination,” the letter reads. “We believe it is necessary and reasonable for theNCUA to adopt such a rulemaking. The NCUA adopted the 2020 IFR in May to dealwith an increase in share growth, resulting from government stimulus payments. Thereasons the 2020 IFR was adopted in May 2020 are still as relevant today, particularly with another round of federal stimulus payments on the way.”
Nine-in-10 See Asset Growth
CUNA and the leagues noted in 2020, 95% of credit unions reported asset increases; the median asset growth for all credit unions was 14.3% during the year. Overall,during 2020, 91% of credit unions reported a decline in their net worth ratio; the median decline was 108 basis points (1.08 percentage points). During the year, the median credit union net worth ratio nationally fell from 12.0% to 10.9%, the letter states.
“Nevertheless, 99.3% of credit union assets remain in credit unions with net worth above 7% at the end of 2020, which is nearly unchanged from the 99.7% level at the start of the year,” the letter adds. “This suggests that additional PCA flexibility on the part of the NCUA will not expose the National Credit Union Share Insurance Fund (NCUSIF) to significant additional stress.”
The letter states the sunsetting of the temporary relief on Dec. 31 “appears to be an arbitrary, convenient date, as there was no indication that the pandemic-related economic challenges would cease by then.”
Net Worth Restoration
In addition, the letter addresses the earnings retention requirement of the 2020 IFR in which the NCUA board exercised its statutory authority “in order to enhance flexibility in the application of the earnings retention requirement to avoid a reduction of shares and thus retain system liquidity and capital adequacy, thereby furthering the purpose of PCA. This procedure will lessen the administrative burden on [federally insured credit unions (FICUs)], and the NCUA in providing this relief, by avoiding the need for numerous waiver applications and responses.”
Political Contributions Resume
Separately, the Board of Trustees for CUNA’s PAC, the Credit Union Legislative Action Committee, voted this week to resume political contributions to federal legislative candidates.
“Credit unions are dedicated to promoting financial well-being for all, and CULAC remains committed to supporting lawmakers who understand and appreciate our mission,” said Jeff Olson, CULAC chair and President/CEO of the Dakota Credit Union Association. “The pause gave us much-need time to reflect and to listen to our donors and key stakeholders. After much consideration, it’s clear our members want to continue to support our electoral work while ensuring candidates supported represent the integrity and values of the credit union movement.”
In addition, CUNA noted the board further affirmed the PAC’s longstanding practice of not donating to presidential campaigns.
CULAC political contributions are funded entirely through voluntary donations from credit union members, staff, and volunteers. Contributions to candidates are made through the cooperative decision of the PAC and state League operating where a candidate is running.
“For over 40 years, CULAC and CUNA have been the credit union movement’s strong political backbone, engaging in both candidate contributions and independent expenditures (IEs),” the association said. “CULAC has one of the most bipartisan records in the country. In the 2020 general election, 387 CULAC-backed candidates won elections to Congress, marking a 96% success rate for the organization’s election efforts.”