ALEXANDRIA, Va. –National Credit Union Administration Deputy Executive Director Rendell Jones offered an update to Congress on the agency’s efforts around climate-related financial risk.
Jones appeared alongside other financial regulatory agency principals before the U.S. House Subcommittee on Financial Institutions and Monetary Policy.
Deputy Executive Director Jones provided the Committee with a summary of the NCUA’s recent climate-related financial risk request for information.
In his comments, Jones noted NCUA’s 2022–2026 Strategic Plan calls on CUs to consider how climate-related financial risks may affect their membership and institutional financial performance.
Goal is an Enhanced Understanding
“The agency’s current work in this area aims to enhance its understanding of these risks,” Jones said. “The agency believes credit unions are best positioned to assess various risks and opportunities within their specific fields of membership. Climate change presents several conceptual and practical challenges for credit unions and the NCUA. Just as credit unions must continue to adapt to account for climate-related financial risks, among other risks, the NCUA must evolve its understanding of the impact on credit unions, credit union members, the credit union system, and the National Credit Union Share Insurance Fund (Share Insurance Fund).”
Among the points made by Jones:
Interagency Involvement
Jones said NCUA is engaged in interagency efforts to study and address climate-related financial risks as part of Financial Stability Oversight Council (FSOC), which has established a Climate-related Financial Risk (CFRC).
He said NCUA staff are also working with other FSOC member agencies to test a data and analytics platform developed by the Office of Financial Research for FSOC CFRC members to facilitate analysis of climate-related financial risks and collaboration on research.
He added that credit unions most at risk of negative outcomes due to natural hazards tend to be located in coastal areas, particularly in California, Texas, and Florida. These three states account for 11 percent of credit unions located in communities with an elevated risk and 22% of credit union assets, he said.
Request for Information
Jones noted that in late April NCUA issued a voluntary request for information (RFI) seeking input from stakeholders and subject matter experts to “strengthen the agency’s ability to identify and assess credit unions’ current and future climate-related financial and natural disaster risks,” as CUToday.info has reported.
“The NCUA’s goals in issuing the RFI are twofold. First, the agency seeks to improve its understanding of climate-related financial risks, how credit unions view them, and how it can best support the industry in mitigating them,” Jones continued. “And second, the agency aims to better understand the products and services credit unions can offer to leverage opportunities presented by any related transitions in the economy’s energy, transportation, construction, housing, and other applicable sectors.”
The comment period closed on June 26, 2023, and the agency received 44 responses.
Legislative Priorities
Jones told Congress the NCUA board has requested a statutory change allowing the Central Liquidity Facility program to permit corporate credit unions to purchase capital stock on behalf of a subset of their members.
The Goals
"The NCUA’s goals in issuing the RFI are twofold. First, the agency seeks to improve its understanding of climate-related financial risks, how credit unions view them, and how it can best support the industry in mitigating them,” Jones said. “And second, the agency aims to better understand the products and services credit unions can offer to leverage opportunities presented by any related transitions in the economy’s energy, transportation, construction, housing, and other applicable sectors."
Jones again expressed NCUA’s position it needs statutory authority to examine and supervise third-party vendors.
Finally, Jones said that the 2008 financial crisis demonstrated that significant failures or other shocks to the system could quickly deplete the Share Insurance Fund’s equity levels.
As a result, NCUA is seeking to remove the statutory limits on the normal operating level, so the board can more “proactively manage the fund, Jones said.
The full testimony can be found here.
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