NCUA adopts CLF, asset threshold interim final rules

March 18, 2021

The NCUA board adopted an interim final rule to update its regulations regarding the temporary changes to the Central Liquidity Facility (CLF) initially made by the CARES Act, including increasing the CLF’s borrowing authority and allowing corporate credit unions to act as agent members to borrow for their own needs.

In his remarks, Chairman Harper stated his intent to urge Congress to make the CLF provisions first incorporated into the CARES Act permanent.    

Asset Thresholds Pertaining to Large Credit Unions 

The Board adopted an interim final rule to permit federally insured credit unions to use asset data as of March 31, 2020, in order to determine the applicability of certain regulatory asset thresholds during calendar years 2021 and 2022. Specifically, the interim final rule allows a credit union to use March 31, 2020, financial data when determining whether the institution is subject to capital planning and stress testing requirements under the NCUA’s regulations and supervision from the Office of National Examinations and Supervision.

The agency recognizes the impact of the government stimulus payments together with consumers change in spending habits has had on credit union growth, in some cases pushing them over the $10 billion threshold. This temporary interim final rule is intended to mitigate transition costs on credit unions related to the pandemic and will conclude at the end of 2022.

CUNA has urged the agency to issue such a rulemaking, including in a recent letter to Chairman Harper.

PCA relief

The Board will soon consider a temporary rule to extend the Prompt Corrective Action (PCA) relief provided for in an interim final rule that expired at the end of last year. Specifically, the May 2020 interim final rule:

  • Permitted the NCUA Board to issue an order to temporarily waive the earnings retention requirement for any credit union classified as adequately capitalized; and
  • Permitted credit unions to submit simplified net worth restoration plans if the reduction in capital was caused by share growth resulting from a temporary condition due to the pandemic.

CUNA has called on the Chairman to extend this PCA relief.

NCUA Guaranteed Notes and Asset Management Estates Update

The NCUA also issued an update on the NCUA Guaranteed Notes Program and Asset Management Estates and announced an upcoming distribution. The agency will continue to make distributions as appropriate until the program is terminated.

Based on the NCUA’s end of program projected capital payouts:

  • Southwest Corporate – returning 22.9% of the initial 100% of membership members capital with $92.5 million approved distribution.  42% was distributed in July 2020, so that brings the recovery to almost 65% of the 100% original investment, and it is projected 100% of capital will ultimately be returned.
  • Members United - returning 25.6% of the initial 100% of membership members capital with $126.2 million approved distribution. NCUA's base scenario projects an eventual 100% return of membership capital.
  • US Central - returning 8.9% of the initial 100% of membership members capital with $150 million approved distribution.

In early April, NCUA will begin reaching out directly to each affected credit union. The interim distribution totaling $368.7 million, which is expected to be sent to the roughly 2,000 affected credit unions, will be distributed by April 30.

Complete coverage of the meeting can be found on CUNA’s Removing Barriers Blog.