ARLINGTON, Va.—NAFCU has written to the Federal Reserve to offer the association’s support for an interim final rule (IFR) concerning temporary asset threshold relief for community financial institutions.
Senior Counsel for Research and Policy Andrew Morris stated in the letter that while the IFR eases the transition to new regulatory standards for community institutions by adopting more flexible standards for measuring asset growth and provided, there are several areas where clarifications may benefit credit unions.
As credit unions have seen a large influx of deposits over the past year resulting from coronavirus-related relief efforts and changes in members' financial habits, Morris noted NAFCU has flagged concerns for credit unions approaching the $10 billion asset threshold, wherein the loss of “small issuer” status under Regulation II could limit the availability of resources that might otherwise be used to support forbearances and other types of accommodations aimed at addressing pandemic-related hardship.
“To ensure that such relief reasonably reflects the magnitude of direct economic stimulus paid to individuals under the American Rescue Plan Act of 2021 and conforms to similar relief measures adopted by other banking regulators, we ask that the board specify that for the purpose of Regulation II, asset growth in 2020 or 2021 will not trigger new regulatory requirements until July 1, 2023 at the earliest,” wrote Morris.
‘Working Tirelessly’
“The entire credit union industry has been working tirelessly to fuel the engine of economic recovery to help members who have lost jobs or experienced financial strains due to the pandemic,” Morris stated. “The intensity of this member-focused activity coincides with an accelerated timeframe for adjusting to new, asset-based regulatory requirements. Recognizing the difficulty of these circumstances, the NCUA recently issued an interim final rule that addresses credit union specific asset threshold relief.”
NAFCU pointed out NCUA’s rule allows a federally-insured credit union to use asset data from March 2020 for the purpose of determining the applicability of regulatory thresholds during calendar years 2021 and 2022. The NCUA’s comparatively longer period for asset threshold relief – relative to the IFR’s provisions concerning Regulation II applicability – recognizes the impact of additional stimulus money authorized by the American Rescue Plan Act, Morris noted.
Morris urged the board to clarify that credit unions may use, through Dec. 31, 2021, asset data on either Dec. 31, 2019 or Dec. 31, 2020, whichever is lower, for purposes of determining the applicability of Regulation II’s requirements.