ALEXANDRIA, Va.–The NCUA Board has unanimously approved by notation vote an interim final rule that amends its capital adequacy and member business loans and commercial lending regulations following the creation of the Small Business Administration’s Paycheck Protection Program (PPP).
Separately, the agency has also created a new Office of Ethics Counsel.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act created the PPP to help businesses affected by the coronavirus pandemic to cover their payrolls, along with other expenses. The CARES Act requires PPP loans receive a 0% risk weighting under the NCUA’s risk-based capital requirements. To reflect this statutory requirement, the agency said the interim final rule amends the NCUA’s capital adequacy regulation so that covered PPP loans receive a 0% risk weight in the agency’s risk-based net worth requirements.
“These regulatory changes ensure that credit unions can participate in the program without worrying about the potential for increased regulatory burdens or capital requirements,” said NCUA Chairman Rodney Hood.
Additionally, under the interim final rule, if a loan is pledged as collateral for a non-recourse loan provided through the Federal Reserve System’s PPP Lending Facility, the covered loan can be excluded from a credit union’s calculation of total assets for the purposes of calculating its net worth ratio, NCUA said. This ensures that credit unions can neutralize the regulatory capital effects of PPP loans pledged to the facility, it added.
NCUA further stated the interim final rule also makes a conforming change to the definition of a commercial loan in the NCUA’s member business loans and commercial lending rule. Under the rule, PPP loans are excluded from the definition of a commercial loan because the unique nature of these loans mitigates the need for enhanced commercial underwriting.
NCUA Creates new Office of Ethics Counsel
Separately, NCUA said it has created a new Office of Ethics Counsel.
NCUA is looking for a new ethics officer after the person who previously held the position, Michael McKenna, resigned from the agency in 2019, with NCUA’s Office of Inspector General later issuing a report that found while serving as general counsel and ethics officer McKenna had consumed alcohol, made multiple trips to strip clubs and consumed edible marijuana during work hours and during work-related travel. The full story is here.
According to the agency, the new office will include a chief ethics counsel who will serve as the agency’s most senior ethics official. This individual will report directly to the NCUA Board and will be supervised by the NCUA chairman. The selection process for the new Chief Ethics Counsel is underway, NCUA said.
The new office, which was approved during the board’s closed meeting on March 19, will certify the agency’s compliance with relevant federal ethics laws and regulations, promote accountability and ethical conduct, and help ensure the success of the NCUA’s ethics programs.
NCUA did not disclose what it has budgeted for compensation for the new position or related office costs.