CUNA Urges Congress for PCA Forbearance

On Thursday, CUNA sent a letter to members of the Senate Banking, Housing and Urban Affairs Committee to ask for congressional help to improve Prompt Corrective Action (PCA) and make changes to the Central Liquidity Facility (CLF) to assist credit union members during the pandemic.

In a letter filed from CUNA to the committee, CUNA President/CEO Jim Nussle wrote, “The COVID-19 pandemic and ensuing economic crisis has impacted every aspect of society. Credit unions and their members have not been immune from the consequences, but credit unions have remained in a position to continue to serve their members through the crisis as a result of critical steps taken by Congress, the administration and the NCUA.”

While praising steps taken by lawmakers and the NCUA, CUNA said one area lacking attention has been with the PCA.

“Credit union capital requirements are different than bank requirements in several respects, including provisions in section 1790d of the Federal Credit Union (FCU) Act providing that only retained earnings count as Tier I capital for credit unions and thresholds for credit union capital levels are hardwired into statute. Having these requirements in the statutory text restricts (the) NCUA’s ability to provide accommodations to otherwise healthy credit unions impacted by natural disasters, pandemics and other crises,” the letter stated.

Enhancements made to the CLF, as part of the CARES Act passed by Congress to address numerous pandemic-related items, increased the multiplier from 12 to 16 and, according to CUNA, made it easier for credit unions to join the CLF through its corporate credit union. But, these changes are set to expire at the end of 2021.

“The CARES Act provisions represent a recognition that existing law does not afford credit unions sufficient access to emergency liquidity during times of crisis. It is insufficient and could prove unsafe to allow the CLF to return to its previous level of borrowing authority and its previous state of restricting access for corporate credit unions,” the CUNA letter stated.

Therefore, CUNA has called on Congress to enact permanent legislation to accomplish the following:

• Provide flexibility to the NCUA to offer forbearance from prompt corrective action to otherwise healthy credit unions impacted by federally declared emergencies or disasters.
• Expanded borrowing authority of the NCUA’s Central Liquidity Facility, as well as other enhancements temporarily enacted in 2020 by the CARES Act.