NCUA Board Approves Interim Final Rule on Asset Reporting

The NCUA board on Thursday approved an interim final rule that will allow large credit unions to use their March 31, 2020 asset data for certain reporting, in an effort to ensure that credit unions are not subject to heightened regulatory requirements merely because of high deposit growth caused by the pandemic.

Credit unions may use asset data at the end of March 2020 to determine whether they are subject to capital planning and stress testing. The rule will remain in effect during 2021 and 2022.

“As financial first responders on the frontlines of the COVID-19 crisis, many credit unions have experienced rapid and unexpected balance sheet growth resulting from government policy responses to and consumer choices resulting from the economic upheaval caused by the pandemic,” NCUA Chairman Todd Harper said.

He added that in most cases the growth will be temporary since it is the result of the pandemic.

“The latest round of stimulus checks and unemployment benefits to Americans across the country will only continue this growth,” he said.

“By taking this step, the NCUA is acknowledging the uniqueness of the situation and not making it harder on credit unions already stretched thin by the circumstances,” board member Kyle Hauptman said.

Harper added that the NCUA board will soon consider a temporary rule to exempt credit unions from certain prompt corrective action regulations that could be triggered as a result of balance sheet changes due to the pandemic.

The board also was told that at the end of April, about 2,000 credit unions will receive a total of $368.7 million that is available from management of the asset estates of three corporate credit unions that failed during the last financial crisis.

Credit unions that have guaranteed notes from U.S. Central, Members United Corporate and Southwest Corporate will receive the funds, agency officials said.

Under questioning from Hood, NCUA General Counsel Frank Kressman said the agency had hired private attorneys to handle the recovery of funds on a contingency basis. Those attorneys have been paid about $1.2 billion, or 23% of the amount recovered. Kressman said he was not general counsel at the time the decision was made to hire they attorneys.

Harper said that agency officials had made a good decision to pursue firms that had sold faulty mortgage-backed securities.

“The shrewd decision to pursue litigation against the Wall Street firms that sold faulty mortgage-backed securities is also a key reason why we are now making distributions,” he said. “Indeed, without those legal recoveries, there would be no checks sent to capital holders.”