NCUA’s Top 10 Compliance Issues

A high-level look at the agency’s top priorities—at least for the moment.

October 22, 2012

With so much attention paid to the Consumer Financial Protection Bureau (CFPB) these days, I thought I would take the opportunity to update you on what I think are NCUA’s top 10 compliance issues (at least for the moment).

10. Interest-rate-risk final rule

This was effective Sept. 30, 2012. This new rule revises NCUA rules and regulations section 741.3(b) and institutes a written interest-rate-risk (IRR) policy and an interest-rate-risk management program as a requirement for insurance. The requirements for this rule are based on your assets and balance-sheet structure.

9. Letter to CU 12-CU-11

If you’re still wondering about the new IRR rule, look no further than NCUA Letter to Credit Unions 12-CU-11, issued in August 2012. This letter is a must-read if you’re still trying to fully understand the rule and the expectations of the regulator.

8. Loan workouts and troubled debt restructuring

NCUA Loan Workouts and Nonaccrual Policy, and Regulatory Reporting of Troubled Debt Restructured Loans was effective Oct. 1, 2012. The intent of this rule is to allow federally insured credit unions to better serve members who are experiencing financial difficulties while reducing the reporting burdens.

Credit unions must adopt and implement a written loan workout and a written nonaccrual policy. NCUA hosted a free webinar, “Loan Workouts, Loan Nonaccrual and Regulatory Reporting of Troubled Debt Restructuring” in September. The archived version is available on NCUA’s website.

7. RegFlex

In 2001, NCUA implemented the Regulatory Flexibility (RegFlex) Program Final Rule to relieve federal credit unions who demonstrated strong net worth and CAMEL performance from certain regulatory restrictions.

In the spirit of reducing the regulatory burden, NCUA eliminated RegFlex effective July 2, 2012. The result is regulatory relief for most federal credit unions, not just those with a RegFlex designation.

6. Emergency liquidity

The Maintaining Access to Emergency Liquidity Proposed Rule was released in July. It amends NCUA rules and regulations section 741 relating to contingency funding plans.

This proposal is in response to the recent financial crisis in the Corporate Credit Union system and the announced closure of U.S. Central Bridge Corporate Federal Credit Union. NCUA is proposing a tiered structure based on a credit union’s asset size for contingency funding plan policies, strategies, and emergency liquidity access.

5. Central Liquidity Facility

If you want to learn more about the proposed emergency liquidity rule, NCUA also issued Letter 12-CU-10. The letter includes a great FAQ on understanding NCUA’s Central Liquidity Facility (CLF), which provides emergency liquidity services to member credit unions.

NCUA also hosted a free webinar, “CLF and Your Credit Union’s Contingent Liquidity” in August. The archived version is available on NCUA’s website.

4. Loan participations

In December 2011, NCUA issued a proposed rule to amend its loan participation regulation. The amendments apply to all federally insured credit unions.

NCUA Chairman Debbie Matz said in June 2012 that final action on this rule is postponed for several months. She noted a concern for protecting credit union safety and soundness while imposing the least burden possible.

3. CUSO proposed rule

In July 2011, NCUA issued a proposal to amend its CUSO rules. It expanded the requirements to cover federally insured credit unions, as well as incorporate new requirements for CUSOs to file financial reports directly with NCUA and state supervisory authorities.

This proposed rule received a lot of attention and concern over NCUA’s statutory authority. The NCUA Board was scheduled to take action on this rule in June but the proposal was pulled and the board meeting cancelled.

NCUA Chairman Debbie Matz said that, like the participation rule, the CUSO rule has been postponed for several months.

2. Corporate stabilization fund assessment

On July 24, 2012, the NCUA Board approved the Temporary Corporate Credit Union Stabilization Fund assessment of .0095%. This is based on your credit union’s insured shares as of June 30, 2012. The assessment was due Oct. 9.

1. Multi-featured open-end lending

If you’re a federal credit union using multi-featured open-end lending (MFOEL) plans, you definitely should read Letter to Federal Credit Union 12-FCU-02, released in July.

It supersedes and replaces NCUA’s previous guidance on MFOEL (issued in 2010) and addresses the hybrid products known as multi-featured lending plans. If you use a hybrid product, then NCUA’s Legal Opinion Letter, 11-0620, published in August, also is a must-read.

Now that you have a high level of what’s going on at NCUA you might want to get back to the CFPB—I hear it has a top 100 list.

JAMI WEEMS is senior compliance officer for PolicyWorks, Des Moines, Iowa, and a contributor to The Works, a compliance blog. Contact her at 866-518-0209.