ARLINGTON–Concerns over the potential for increased administrative burden on CUs related to the Paperwork Reduction Act have been shared with NCUA in a letter from NAFCU.
As required under the Paperwork Reduction Act and a review related to capital planning and stress testing information collection, NCUA is required to occasionally consult the public on ways to minimize burdensome information collection requirements.
But NAFCU Senior Regulatory Counsel Andrew Morris said in the letter credit unions subject to capital planning and stress testing requirements after the expiration of the NCUA’s temporary asset threshold relief measures will be under increased administrative burden as a result of preparing and incorporating results from stress testing on an accelerated.
Saying it would ease the administrative and operational burdens, NAFCU recommended NCUA adopt a three-year phase-in of the stress testing requirement in Subpart E of Part 702 for Tier II covered credit unions. Under the proposed approach, a credit union would remain a Tier I credit union for at least three years before triggering Tier II requirements, regardless of how quickly it reaches $15 billion in total assets, and remain a Tier I credit union for as long as its total assets remain below this threshold, NAFCU said.
Compression of Deadlines
“While credit unions experiencing sustained, pandemic-related growth have benefited from the NCUA’s temporary asset threshold relief, the compression of multiple compliance deadlines in the 2022-2023 timeframe will likely strain staff resources as credit unions prepare for new supervisory expectations,” wrote Morris.
In addition to capital planning and stress testing, credit unions will also have to deal with requirements under the NCUA’s Risk Based Capital Rule (RBC), which will take effect in 2023, and have to comply with the Current Expected Credit Loss (CECL) standard, Morris went on to write. Ensuring compliance with both burdensome requirements and undertaking new stress testing expectations ”could detract from efforts to prioritize member assistance for many Americans who continue to experience pandemic related hardship,” noted Morris.
NAFCU also urged the NCUA to explore broader reconsideration of the covered credit union tiers described in the capital planning and stress testing rules.
“For covered credit unions continuing to experience accelerated growth, the ability to gradually adjust to new supervisory expectations over a longer period will ensure that capital planning and stress testing processes have adequate time to mature and evolve,” stated Morris.