NCUA issues climate risk RFI, hears interest rate cap briefing

April 20, 2023

The NCUA board issued a request for information (RFI) on climate-related financial risk and heard a briefing on the federal credit union loan interest rate ceiling at its April 20 meeting.

The RFI seeks comments “regarding current and future climate and natural disaster risks to federally insured credit unions, related entities, their members, and the National Credit Union Share Insurance Fund,” as well on potential future guidance, regulation, reporting requirements, and/or supervisory approaches management of climate-related financial risks.

“It is important that credit unions have the ability and autonomy to manage their operations in a way that best serves their members," said CUNA President/CEO Jim Nussle. "While today’s action is simply a request for information, we caution against any subsequent NCUA rulemaking activity in this area. Credit unions know their members and their communities’ needs best."

The RFI—consisting of 38 questions—will not be used in examination or supervision, the board said, and any new climate-related financial risk requirements would require regulatory changes.

Comments will be due on the RFI within 60 days of its publication in the Federal Register.

The board’s briefing on the federal credit union loan interest rate ceiling focused on risks of decreasing the current 18% cap back to 15%, but also featured a discussion on the legality of a floating interest rate cap.

CUNA requested NCUA consider adopting a floating cap in a letter sent in January, noting that a floating cap could increase credit union service to consumers with lower credit scores.

Staff said it was “reasonable to interpret the Federal Credit Union Act to permit a floating interest rate ceiling, provided the conditions in the Act are met.”

There was no action taken by the board, but members discussed the challenges of implementing a floating cap, including changes to rules and regulations related to examination, supervision, and certain loan products.

The board also heard a cybersecurity briefing from its Office of Examination and Insurance. It noted six major threats to the credit union ecosystem and the larger financial sector:

  • Ransomware and extortion operations.
  • Social engineering and OpenAI platforms.
  • External-facing application vulnerabilities.
  • Misconfigurations in cloud environments.
  • Distributed Denial of Service attacks.
  • Geopolitical issues.

Detailed analysis of the meeting can be found on CUNA’s Removing Barriers Blog.