WASHINGTON–Both CUNA and NAFCU have sent letters to NCUA expressing support for the agency’s support of a change the agency has made related to the SBA’s Paycheck Protection Program.
CUNA filed a comment letter in support of its technical amendment necessarily to help credit unions that made PPP loans. As CUToday.info reported earlier, NCUA approved by notation vote in April an interim final rule amending certain regulations for PPP loans.
Specifically, CUNA noted 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
- Excludes PPP loans from the definition of “commercial loan”
- Allows a loan to be excluded from a credit union’s calculation of total assets for the purposes of calculating its net worth ratio if the loan is pledged as collateral to the Federal Reserve System’s PPP Lending Facility
“CUNA supports the amendments in the interim final rule as they provide guidance and answer many questions CUNA’s members have had about the treatment of Paycheck Protection Program (PPP) loans on their balance sheet,” wrote Lance Noggle, CUNA senior director of advocacy and senior counsel for payments and cybersecurity.
NAFCU Letter
NAFCU also sent a letter expressing its support of the interim final rule. In the letter, NAFCU Senior Counsel for Research and Policy Andrew Morris wrote, “Regulatory codification of these provisions will allow credit unions to focus on lending to America’s small businesses and facilitating economic recovery in main street communities.”
In addition, the NAFCU letter suggests NCUA clarify that PPP loans will receive a 0% risk weight in its future risk-based capital rule, which is currently set to take effect Jan. 1, 2022.
“Because the maximum maturity of a PPP loan is two years, some PPP loans might remain on credit union books past January 2022,” wrote Morris. "Clarification that PPP loans receive a zero percent risk weight under the RBC rule will ensure that credit unions can continue to treat these loans as low-risk. Furthermore, such clarification could potentially accommodate future legislative efforts to reinvigorate the PPP program or authorize additional funding."
The letter further offers NAFCU's support of NCUA’s action to exclude PPP loans pledged loans from the definition of total assets for the purpose of calculating net worth for PPP loans pledged as collateral to the Federal Reserve’s Paycheck Protection Liquidity Facility (PPPLF).
In addition, Morris recommended the NCUA make technical clarifications to ensure that references to the PPPLF in the interim final rule conform to the official name of the facility. “Ensuring consistency in language will “reduce confusion for credit unions even if the intent of the regulation is clear,” the letter states.