NCUA issues corporate CU proposal, discusses CECL policy
The NCUA board issued a corporate credit union proposal, adopted a final interagency policy statement on the current expected credit loss (CECL) standard at its Thursday meeting. The board also heard briefings on credit union mortgage rates and the National Credit Union Share Insurance Fund.
The corporate credit union proposal is intended to update, clarify, and simplify several provisions of the corporate credit union regulation.
Specifically, it would:
- Permit a corporate credit union to make a minimal investment in a CUSO without the CUSO being classified as a corporate CUSO under NCUA’s rules;
- Expand the categories of senior staff positions at member credit unions eligible to serve on a corporate’s board;
- Amend the minimum experience and independence requirement for a corporate’s enterprise risk management expert; and
- Require a corporate to deduct certain investments in subordinated debt instruments issued by natural person credit unions.
“In issuing the corporate proposal, we appreciate NCUA’s objective of providing additional clarification and simplification regarding the corporate credit union regulation,” CUNA Deputy Chief Advocacy Officer Elizabeth Eurgubian said. “CUNA is currently evaluating the proposed changes in detail.”
Comments will be due within 60 days of the proposed rule’s publication in the Federal Register.
The CECL interagency policy statement addresses:
- Supervisory expectations for documenting and validating expected credit loss estimation processes;
- Responsibilities of boards of directors and management; and
- Examiner reviews of allowances for credit losses.
NCUA staff mentioned it is continuing to work on a proposed rulemaking to provide a three-year phase in of CECL for regulatory capital purposes. Staff is hopeful such a standard will be proposed by the second or third quarter of this year and potentially finalized by year-end.
Agency staff also mentioned the agency will be launching a CECL webpage later this year that will include links to resources from NCUA and others.
The mortgage rate briefing involved an agency analysis of 2018 mortgage originations, comparing interest rates and loan characteristics for loans originated by credit unions and other financial institutions.
The analysis, based on 2018 HMDA data, evaluated 30-year conventional fixed-rate, first-lien loans for one-unit, owner-occupied properties. The research determined that mortgage loans originated by credit unions generally carried lower interest rates than mortgage loans originated by other lenders, which could result in thousands of dollars in savings for credit union member-borrowers.
The briefing on the share insurance fund for the quarter ending Dec. 31, 2019 showed indicated total income of $78.6 million and net loss of $50.5 million.
The balance sheet showed total liabilities and net position of $16.722 billion, an increase of roughly $875 million from Dec. 31, 2018. The fund’s equity ratio stands at 1.35% as of the end of the last quarter.
Additional details on the meeting can be found on CUNA’s Removing Barriers Blog.