Lobby of the NCUA.
During the first NCUA board meeting of 2022, board members voted 2-1 to approve a proposed rule that would require boards of directors at federal credit unions to establish a succession planning process.
According to the NCUA, the proposed rule would necessitate credit union directors to have knowledge of the credit union's succession plan. The proposed rule would give federal credit unions "broad discretion" in how the plan is created and implemented.
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"At its core, this rulemaking is about federal credit unions of all sizes — especially smaller credit unions that do not already have succession plans — planning for their futures, so they can continue to serve their members for generations to come as independent entities," NCUA Chairman Todd Harper said. "Small credit unions are at the heart of the movement, and we need to find a better way to preserve them, instead of consolidating them."
In discussions about the proposed rule, it appeared the reasons for its creation stemmed from the growing number of credit union mergers, as well as a high volume of credit union executive leadership retirements announced during the pandemic and the discovery that credit unions simply had not planned for any sort of succession.
"In my view, this rule goes too far," said Board Member Rodney Hood, who voted against the proposed rule.
Hood added that he worried the "proposed rule will be counter-productive and it will produce the exact opposite result of its intended effect. The smallest credit unions are struggling to stay open, so today's rule could actually accelerate mergers in my view."
According to the NCUA, comments on the proposed rule must be received no later than 60 days after publication in the Federal Register.
NCUA's 2022 Supervisory Priorities
Board members were briefed on the agency's 2022 supervisory priorities, which included focus areas for examination programs. According to the NCUA, the focus areas include:
- Credit risk management;
- Information security (cybersecurity);
- Consumer financial protection;
- Payment systems;
- Fraud;
- London Inter-Bank Offered Rate (LIBOR) transition;
- Bank Secrecy Act and anti-money laundering compliance/countering the financing of terrorism;
- Capital adequacy and risk-based capital rule implementation;
- Loan loss reserving;
- Loan participations; and
- Interest rate risk.
Strength in Central Liquidity Facility
The board members were also briefed on the status of the Central Liquidity Facility (CLF) following the expiration of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, as well as the Consolidated Appropriations Act of 2021.
During the update from officials with the NCUA's Office of Examination and Insurance, board members learned the CLF's borrowing authority stood at $26 billion as of the beginning of the year. According to the update, nearly 80% of all federally-insured credit unions have access to the CLF.
Harper said, "With currently more than $26 billion in borrowing capacity, I am pleased to see the CLF remains a strong source of emergency liquidity should the need arise in 2022. However, the expiration of the enhanced borrowing authority and other CLF provisions in the Coronavirus Aid, Relief, and Economic Security Act is concerning, especially with the pandemic and its financial and economic disruptions continuing into this year."
The CARES Act and the Consolidated Appropriations Act expired on Dec. 31, 2021.
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Michael Ogden
Editor-in-Chief at CU Times. To connect, email at [email protected]. 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.
