ARLINGTON, Va.–Relief provided to credit unions under a recent interim final rule from NCUA is helpful, but there are additional relief steps that can be taken to help larger credit unions as they scramble to prepare for enhanced supervisory requirements, NAFCU told the agency.
Writing in response to the interim final rule (IFR) issued by NCUA to temporarily amend its regulations in Part 702, Subpart E (Subpart E) regarding capital planning and stress testing requirements for covered credit unions, NAFCU said it backs NCUA’s decision to provide relief to those credit unions that have recently crossed the $10 billion threshold and other thresholds in Subpart E in measuring total assets for purposes of the capital planning and stress testing requirements through 2021 and 2022.
The trade group said it is encouraging NCUA to also provide broader relief regarding the timeframe for calculating credit union assets to assist those credit unions that have seen remarkable share growth during the pandemic and are nearing the threshold for compliance with Subpart E’s requirements but have not yet passed that threshold.
In addition, NAFCU said it is calling on the NCUA to clarify its reservation of authority to subject certain credit unions to the enhanced regulatory requirements in Subpart E.
“The NCUA should also pursue enhanced coordination with the Consumer Financial Protection Bureau (CFPB) regarding examinations generally and asset threshold measurement for purposes of supervision and examinations,” wrote NAFCU Director of Regulatory Affairs Ann C. Kossachev.
‘Opportunity to Concentrate on Member Service’
“For those FICUs that recently crossed the $10 billion asset threshold or the $15 billion and $20 billion thresholds, the IFR represents an opportunity to concentrate more fully on member service during this critical period while thoughtfully executing long-term growth strategies and preparing for enhanced regulatory requirements,” the letter reads, before adding, “Despite the IFR’s issuance, new and increased regulatory requirements and costs are still threatening to arrive years sooner than previously anticipated for a number of FICUs. The IFR’s applicable period is too limited because many credit unions are approaching the $10 billion threshold but will not be able to avail themselves of the relief offered in this IFR. The disparity in flexibility afforded to those credit unions that have recently crossed and those that may soon cross the $10 billion asset threshold justifies another assessment for potential further relief.”
NAFCU said it would also like to see a more permanent change to the NCUA’s present mode of calculating FICUs’ total assets when determining the applicability of Subpart E’s capital planning and stress testing regulations, and that it supports the use of March 31, 2020, as the benchmark making the determination.
In addition, said NAFCU, FICUs whose total assets retreat below the $10 billion threshold as the U.S. and world economies emerge from the pandemic’s stresses will “not incur unnecessary regulatory burden in the interim. Other FICUs may take the opportunity afforded through this IFR to thoughtfully reduce total assets below the $10 billion threshold by divesting less impactful and less efficient business lines, thereby achieving more time to prepare for supervision by the NCUA’s Office of National Examinations and Supervision (ONES) and the CFPB.”
Reservation of Authority
NAFCU said it also supports the NCUA reserving authority to require certain FICUs crossing the $10 billion threshold due predominantly to pre-planned mergers or purchase and assumption transactions to abide by Subpart E’s capital planning and stress testing regulations.
“Although significant unplanned share growth alone does not increase a FICU’s long-term risk profile, even modest mergers and similar institution-combining transactions and thoughtful expansion into new financial services may raise a FICU’s risk profile both in the short- and long-term,” the letter states.
The letter called on NCUA to provide greater detail as to how it is evaluating the relevant factors listed in the IFR, specifically asset growth as a result of a merger or purchase and assumption transaction.
NAFCU also urged the agency to coordinate with the CFPB on examinations, including recently signing a Memorandum of Understanding (MOU) to “reduce redundancy and unnecessary overlap.”