WASHINGTON—NAFCU has suggested to NCUA a number of ways it says the agency can revise its call report to improve the process for credit unions, while separately also offering feedback on allowable claims in credit union liquidations.
In a letter to the agency in response to its request for information (RFI) on its call report modernization efforts, Ann Kossachev, NAFCU's regulatory affairs counsel, outlined areas where it says the regulatory burden could be made lighter. The RFI was issued after a public comment period in 2016 and the agency's call report modernization working group created prototypes of updated call report and profile forms.
Call report changes supported by NAFCU, Kossachev wrote, include:
- Removing obsolete account codes and consolidating items when possible
- Reorganizing the call report format to create a more integrated, streamlined and user-friendly format
- Removing a section on troubled debt restructured (TDR) loans to account for new CECL accounting standards
- Reducing derivatives reporting from what is currently a five-page reporting requirement to one page
Kossachev noted that the proposed call report reduces total account codes to 919 – the lowest level in nearly a decade.
Additional changes NAFCU recommends the NCUA consider, detailed in Kossachev's letter, include:
- Removing the arbitrary $50,000 threshold for reporting aggregate member business purpose loans or relationship loans
- Reducing uncertainty related to risk-based capital calculations by ensuring as many fields as possible are auto-populated and phasing out the risk-based net worth requirement page
- Reevaluating the approach and instructions for reporting first draws in a calendar year on revolving credit lines as new loans, regardless of origination date
- Reviewing reporting instructions to address various ambiguities and inconsistencies applied within different sections
Kossachev also requested NCUA pursue a one-year phase-in process of the new call report and profile forms to allow credit unions enough time to make necessary adjustments to existing automation and potentially build new processes.
Reg On Involuntary Liquidation
Separately, NAFCU Regulatory Affairs Counsel Andrew Morris told NCUA that severance should be an allowable claim in liquidation."
Morris sent a letter to the agency regarding NCUA’s efforts to amend its regulation on involuntary liquidation.
While agreeing with much of the NCUA's proposal, Morris added that executive-level severance claims should also be a permitted claim in liquidation.
During the NCUA board's January meeting, the agency issued a proposal seeking to update and clarify its involuntary liquidation procedures for those federally insured credit unions that enter involuntary liquidation. More specifically, the proposal would amend the current rule's payout priority provision relating to severance claims. The change would clarify the application of the NCUA's regulation on golden parachute payments to severance claims submitted by employees of liquidated credit unions.
"NAFCU is concerned that restrictions on the provability of separately negotiated executive severance agreements will impair credit unions' ability to recruit, motivate, and retain talented managers and executives," Morris wrote.
He explained that offering contingent benefits or severance pay can serve as motivation for and help retain key credit union employees. Part of the NCUA's proposal would require that claims for vacation, severance and sick leave pay meet certain standards. The proposal also indicates that NCUA intends for restrictions on certain severance claims to be applicable in cases where an executive level employee's contract or benefits plan differs from what is generally offered to other employees.
"To guard against employee attrition during times of financial stress, credit unions may find it necessary to use separate eligibility criteria when negotiating post-employment benefits arrangements with executives," Morris wrote. He urged the NCUA to clarify its applicable eligibility requirements to ensure consistency with NCUA's regulations concerning golden parachute payments.