Fixed-assets cap, stress testing deadlines addressed in final rules

July 24, 2015

ALEXANDRIA, Va. (7/24/15)--Starting Jan. 1, 2016, federal credit unions will not be subject to the current 5% cap on fixed assets. That rule, along with a final rule involving shifting the stress test and capital planning schedules, were approved by the National Credit Union Administration board Thursday.

The new fixed-assets final rule not only will remove the 5% threshold, it will also eliminate a waiver process, and establish a six-year time period for partial occupancy of premises.

“We’re pleased the NCUA board listened to CUNA and credit unions by removing the 5% fixed-assets threshold,” said Jim Nussle, president/CEO of CUNA. “CUNA has long advocated for this change which will allow credit unions more flexibility in deploying resources to benefit their members. However, we will not have a complete picture of the true regulatory relief until NCUA provides credit unions with guidance.”

The NCUA’s Office of Examination and Insurance has drafted a supervisory letter that will provide guidance to examiners to address safety and soundness compliance.

“This supervisory guidance will not only help with ensuring examination consistency, it will provide exam scoping policies and procedures and expectations for safe and sound fixed asset management,” said D. Scott Neat, director of the NCUA’s Division of Supervision. “It will be provided prior to the rule’s effective date, likely sometime in September.”

NCUA Chair Debbie Matz said the idea of the rule is to allow fixed-asset decisions to be made at the credit union board level, rather than at the NCUA level.  

“It’s important to remind stakeholders that an overconcentration of fixed assets can be dangerous and can have a negative impact on some credit unions,” she said. “Since 2009, high levels of fixed assets have been a primary or contributing factor in 15% of federal credit union failures. Even through credit unions now have this authority, they need to be thoughtful and diligent in how they exercise that authority.

Matz added that NCUA may supervise ownership of fixed assets “more cautiously than we have before,” particularly to see if credit unions can afford the negative impact on earnings and net worth.

 The final rule regarding capital planning and stress testing will adjust the timing of certain events in those cycles.

 Specifically, credit unions now have until May 31 to submit capital plans to the NCUA, and the NCUA must provide stress test results to credit unions by Aug. 31.