NCUA official seal. (Source: NCUA) Numerous credit union organizations have asked the NCUA for help with adding tools to assist credit unions facing prompt corrective action and capital challenges caused by the pandemic.
In a letter to the NCUA late last week, CUNA and 35 different credit union leagues and associations that are members of the American Association of Credit Union Leagues urged the agency to ask Congress and work with lawmakers to adopt PCA changes in the Federal Credit Union Act.
The credit union organizations said they believe updating the section of the Federal Credit Union Act would give the NCUA "additional tools to aid otherwise healthy credit unions that encounter crisis-induced PCA challenges."
According to the letter, the pandemic revealed the limitations the NCUA has to help credit unions during times of emergency. The letter stated the "NCUA lacks the statutory flexibility it needs to help credit unions navigate certain capital situations induced by natural disasters, public health crises, other emergencies and the governmental responses thereto."
While most credit unions entered the coronavirus crisis well capitalized, the economic fallout has put extreme pressure on credit unions' capital levels as stimulus checks sent to consumers by the government "have presented downward pressure on otherwise healthy capital levels," the letter stated.
This Week's NCUA Board Agenda
The NCUA Board will hold its sixth meeting of the year on Thursday. There are three items on the agenda that have gained the attention of CUNA officials, who have said they see the items as all positive for the credit union industry. The agenda items include:
Final Rule, Part 702, Current Expected Credit Loss Methodology. This issue concerns the CECL phase-in that has been in the works for some time as CUNA and others have pushed the NCUA to propose and then finalize this rule. "And while the effective date for credit unions regarding CECL is not until 2023, of course credit unions are making a lot of progress in getting changes necessary for compliance," CUNA Senior Director of Advocacy and Counsel Luke Martone said. "We continue to encourage the NCUA to do more in terms of compliance materials and other resources for credit unions."
Final Rule, Part 741, Appendix B, Capitalization of Interest. This issue concerns the final rule regarding capitalization of interest in connection with loan workouts and modifications. According to Martone, "The current prohibition on capitalization of interest is overly burdensome and in some cases, we think that it prevents, or at least makes it more difficult, for credit unions to engage in loan workouts with borrowers that are facing difficulty related to the pandemic. But we support and appreciate that this final rule will not necessarily be limited to just during the pandemic or other stress."
Federal Credit Union Loan Interest Rate Ceiling. This issue concerns the idea of replacing the traditional fixed interest rate cap with a floating interest rate cap. In 2019, CUNA sent a letter to the NCUA asking the agency to look into this idea. It is unclear what steps the NCUA board will take with this particular issue.
The public will be able to watch and listen to a livestream of the NCUA board meeting beginning at 10 a.m. EST Thursday using a link provided on the agency's website.
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Michael Ogden
Editor-in-Chief at CU Times. To connect, email at mogden@cutimes.com. As Editor-in-Chief of CU Times since 2016, Michael Ogden has led the editorial team in all aspects of content strategy and execution, including the creation of the publication’s exclusive and proprietary research database of the credit union industry’s economic landscape. Under Michael’s leadership, CU Times has successfully shifted to an all-digital editorial product with new focuses on the payments, fraud, lending and regulatory beats. Most recently, he introduced a data-focused editorial product for subscribers that breaks down credit union issues into hard data, allowing for a deeper and more factual narrative for readers. In 2024, he launched the "Shared Accounts With CU Times" podcast, which offers a fresh, inside-the-newsroom perspective through interviews with leaders from the credit union industry and the regulatory world. He dives into pressing credit union issues, while revealing the personalities working behind-the-scenes to push the credit union world forward. His background includes years as a radio and TV anchor/reporter and a public relations and digital/social media manager, where he covered the food and music industries, as well as cooperatives and credit unions. Over the years, he has launched numerous exclusive video and podcast series, including a successful series of interactive backstage interviews with musicians at music festivals, showcasing his social media and live streaming production skills.
