ALEXANDRIA, Va.–NCUA has announced that prompt corrective action (PCA) changes affecting earnings retention and the filing of net worth restoration plans will remain in place through March 31, 2023. The agency announced the update via an NCUA Express message.
According to NCUA, the provisions are being extended under an interim final rule adopted in February that included authority for the agency board to issue an order, applicable to all federally insured credit unions (FICUs), to waive the earnings retention requirement for any FICU that is classified as adequately capitalized.
NCUA further said the changes extend relief provisions that have been in operation since 2020 to help credit unions remain operational and liquid amid the COVID-19 pandemic.
Specifically, NCUA addressed two issues in its Express message:
- Net worth restoration plans. “An undercapitalized credit union is permitted to submit a streamlined net worth restoration plan if it becomes undercapitalized predominantly because of share growth. If a credit union becomes less than adequately capitalized for reasons other than share growth, it must still submit a net worth restoration plan under the current requirements in NCUA’s regulations.”
- Earnings retention. According to NCUA, the temporary order states that any “consumer (non-corporate) FICU whose net worth classification, as defined in part 702 of the NCUA’s regulations, is adequately capitalized between March 31, 2022, and March 31, 2023, may decrease its earnings-retention requirement as set forth in part 702 to zero…(I)f a credit union either poses an undue risk to the National Credit Union Share Insurance Fund (NCUSIF) or exhibits material safety and soundness concerns, the appropriate NCUA Regional Director may require the credit union to submit an earnings transfer waiver request.”
Regarding Share Growth
Finally, NCUA said its temporary order on earnings retention, which was approved by notation vote of the Board, acknowledges share (deposit) growth in credit unions remains “unusually high compared to pre-pandemic levels,” and that decreasing the earnings retention requirement “is necessary avoid a significant redemption of shares and would further the purposes of the prompt corrective action regulations.”
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