ALEXANDRIA, Va.–The NCUA board has voted 3-0 in favor of a temporary change that keeps a credit union from falling under Prompt Corrective Action rules if its net worth has changed due to an influx of deposits.
Separately, the board also voted in favor of a change in rules on joint accounts.
Regarding PCA, many credit unions have seen deposit inflows as members receive government stimulus checks and also seek safer harbors for their deposits as a result of the coronavirus pandemic. It is expected most of those funds will eventually flow back out.
NCUA said the change allows a CU to remain operational and liquid during the crisis and allows the board to issue an order applicable to all FICUs to waive the earnings retention requirement for any FICU that is classified as adequately capitalized, and further modifies other rules with respect to the specific documentation required for net worth restoration plans.
“Specifically, the temporary amendments in this interim final rule will allow FICUs to better utilize resources by reducing the administrative burden associated with a temporary increase in shares,” NCUA said. “The board has concluded that the amendments will provide FICUs with necessary additional flexibility in a manner consistent with the NCUA’s responsibility to maintain the safety and soundness of the credit union system.”
The temporary amendments are effective upon publication and will be in place through Dec. 31, 2020.
Board Members Comment
NCUA Chairman Rodney Hood said the temporary rules changes will allow the agency to better address those CUs that represent an actual elevated risk to the share insurance fund.
“If a credit union needs to make policy adjustments (because it is) facing stress from the crisis, we at NCUA want to give them the flexibility they need,” he said.
Board Member Todd Harper said he supported the proposal because it is “tailored and targeted,” and it sunsets at year end.
Board Member J. Mark McWatters said the proposal helps ease the “plight” of the credit union that must wrestle with accepting additional deposits even if it means driving down net worth.
“This is a smart rule. This addresses a mathematical problem that is, more likely than not, temporary,” said McWatters.
NAFCU Response
“NAFCU supports the NCUA’s decision to adjust the prompt corrective action rules to account for current economic uncertainty and we thank NCUA Chairman Rodney Hood, and Board Members Todd Harper and J. Mark McWatters for voting in favor of the rule,” said NAFCU Director of Regulatory Affairs Ann Kossachev. “While the industry is safe and sound, it is imperative that credit unions have an environment where they can continue to focus their efforts on assisting members in financial need and managing their operations without grappling with administrative burdens.”
CUNA Response
“We thank NCUA for reviewing its PCA regulations with an eye on additional flexibility for credit unions that may see a temporary dip in their net worth leverage ratio due to the effects of COVID-19. CUNA supports giving credit unions flexibility to help them aid in COVID-19 recovery efforts while helping ensure they remain operational and liquid throughout the crisis," said Deputy Chief Advocacy Officer Elizabeth A. Eurgubian.
NASCUS Response
"We agree that relief from net worth requirements is appropriate if declines are a result of growth in shares related to the COVID-19 crisis. Shares in credit unions are increasing from a combination of consumers’ natural tendency to save in times of crisis, recently issued stimulus checks and PPP loan disbursements, and consumers’ flight to safety," said NASCU CEO Lucy Ito. "Indeed, during past crises, consumers historically have gravitated towards credit unions for the safekeeping of their household funds. While NASCUS understands that the current crisis has motivated NCUA to move swiftly, NASCUS also reminds NCUA that under §1790d of the Federal Credit Union Act, the agency is required to consult with state credit union supervisors on PCA matters. Twenty years ago, NCUA and state credit union regulators jointly crafted the PCA framework which has withstood the test of time partly due to federal-state coordination. State credit union supervisors stand ready, again, to collaborate with the agency as required by the Federal Credit Union Act.”
New Rule on Joint Ownership
The NCUA board also voted 3-0 to adopt a proposed rule on joint ownership share accounts. The change, which brings NCUA in line with a move made in 2019 by the FDIC, tweaks rules around joint ownership accounts and signature cards. Under the new change, instead of requiring each co-owner to have independently signed a signature card, and allow that requirement to be satisfied by information in the account records, such as showing a debit card for each co-owner, or usage of the joint account by each co-owner.
NCUA staff said the change will not require any new recordkeeping on the part of credit unions.