PCA proposal will help CUs, no need to set specific end dates

June 29, 2020

NCUA’s proposed temporary prompt corrective action (PCA) changes would provide agency staff and credit unions with additional necessary flexibility, CUNA wrote to NCUA Monday. The board issued the interim final rule at its May board meeting with two changes to PCA requirements.

The first would allow credit unions more flexibility if they fall to the PCA “adequately capitalized” level due to unhistorical, abnormal share deposit influxes.

Specifically, it changes the existing requirement for an “adequately capitalized” credit union to increase the dollar amount of net worth by a specified amount until the credit union becomes “well-capitalized,” and instead provides a blanket waiver by the NCUA Board of the earnings retention requirement for all “adequately capitalized” credit unions.

The second would temporarily waive net worth restoration plans under existing PCA requirements for credit unions that become “undercapitalized” primarily as the result of share deposit growth.

“This change is reasonable, as it reduces the burden on credit unions that have reduced net worth capital ratios primarily because of share deposit growth during the pandemic,” CUNA’s letter reads.

CUNA also suggests NCUA consider not prematurely setting a specific end date of these temporary relief measures, instead that the NCUA Board extend these temporary measures until the end of the COVID-19 pandemic as determined by the Centers for Disease Control or other Federal entity authorized to make such a determination or no earlier than 2022 (whichever comes first).

“This would help ensure these important and prudent PCA relief measures are available throughout the pandemic and it’s resulting economic turbulence and volatility, and do not expire at an arbitrary date that may require change again by the Board in the future,” the letter reads. “