ALEXANDRIA, Va.—NCUA has extended the comment period for its proposed rule to clarify requirements for a federally insured credit union when it proposes to acquire or merge with a bank or other institution. The comment period, which was to close Monday after a 60-day period, will now run an additional 60 days from the date the extension notice is published in the Federal Register.
NASCUS expressed support for the decision to extend the comment deadline. The agency did not disclose a reason for the extension.
Prior to announcing the comment extension, NAFCU had said if NCUA is really looking for ways to improve its rules related to combination transactions, a good place to start would be with an expeditious timeline for streamlining the existing requirements around “combination transactions,” that is, acquisitions of bank assets.
As CUToday.info reported here, in January NCUA issued the proposed to create a new Subpart D of Part 708a that seeks to clarify and make transparent the procedures and requirements currently in place for combination transactions.
A combination transaction includes a credit union seeking to assume liabilities, merge, or consolidate with other financial institutions. In the letter, NAFCU Director of Regulatory Affairs Ann Kossachev noted that the transactions “overwhelmingly benefit local communities that may lose community-focused financial services as well as jobs and access to branches if, instead, a national bank purchases the local community bank.”
Objection to Rigid FOM Rules
Kossachev shared NAFCU's objection to any rigid field of membership requirements that could impose unnecessary burdens on the process of a bank selling to a credit union and could hinder a credit unions ability to serve underserved communities.
“NAFCU appreciates the NCUA’s efforts to provide transparency for transactions where a credit union merges, consolidates, or assumes the liabilities of a bank. NAFCU urges the NCUA to streamline and offer a clear timeline for the approval of such transactions as well as provide greater flexibility for FOM requirements both under this proposed rule and more broadly in its regulations,” Kossachev explained. “Such flexibility would afford credit unions opportunities to better serve underserved communities by keeping branches open and offering access to safe, affordable financial products and services.”
Two Possible Steps
Kossachev outlined two possible steps to streamline the NCUA’s application process, including:
- The adoption of a 30-calendar day notification timeline to acknowledge receipt of a credit union’s application, providing credit unions and the bank transaction partner with certainty that the NCUA’s review of the application is ongoing
- The adoption of a six-month timeline for review and approval of applications, with the potential for several one-month extensions to allow sufficient time for credit unions to collect important financial documents and other information required.
“A timeline for the NCUA to complete its review of the application and either approve or deny the transaction would keep all parties accountable,” suggested Kossachev.
Clarification Requested
However, Kossachev noted NAFCU recognizes all combination transactions are not the same, and each transaction may face different obstacles and require different timelines. She encouraged the NCUA to keep this in mind as well and suggested that “bright-line requirements are not appropriate; however, clear guidelines and expectations for the process are essential.”
In addition, Kossachev requested clarification on how the proposed section will interact with existing regulations about the purchase and assumption of liabilities, and if these changes will affect transactions that are currently being processed by the NCUA.
NAFCU noted that as the topic of mergers between credit unions and banks has been prevalent in the last year, NCUA Board Chairman Rodney Hood indicated the agency would clarify credit unions' regulatory responsibilities when acquiring banks.
NASCUS Response
In response to the extension of the comment period, NASCUS President/CEO Lucy Ito said, “NASCUS appreciates the NCUA board heeding our recommendation and extending the comment period for the proposed Combination Transaction Rule. The board’s extension enables state supervisory agencies, credit unions, state leagues and other stakeholders--within and outside the credit union system--to focus on their respective responses to the COVID-19 pandemic. The proposed rule would impact the business decisions of federally insured credit unions and we commend the Board for granting commenters additional time to properly deliberate on such consequential rulemaking.”