NCUA Approves CUNA/League Requested Extension of PCA Relief

Source: CUNA

The NCUA board approved an interim final rule extending COVID-19 Prompt Corrective Action relief through the end of March 2023. CUNA, the American Association of Credit Union Leagues, and all Leagues wrote to NCUA calling on it to extend the rule before its scheduled March 31 expiration.

“Thanks to the NCUA board for approving an extension of this interim final rule, the reasons it was first adopted in 2020 are still very much relevant today,” said CUNA President/CEO Jim Nussle. “Credit unions continue to deal with an increase in share growth and related PCA challenges.”

Specifically, the interim final rule:

• Permits the NCUA board to issue an order to temporarily waive the earnings retention requirement for any credit union classified as adequately capitalized; and
• Permits 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.

Of note, Vice Chairman Kyle Hauptman and Board Member Rodney Hood argued that this should be the last extension of this rule and warned against it becoming permanent.

However, Chairman Todd Harper noted: “For nearly two years, the pandemic has greatly affected the credit union system and our nation’s economy. We, however, likely have not yet seen the full impact of the pandemic on consumer credit union balance sheets and performance. As such, the renewal of these targeted measures for another year is a prudent course of action at this time.”

Harper noted that with inflation, interest rate risk, and labor market and supply chain disruptions likely to continue well into 2022, consumer credit unions have their hands full.

NCUA also issued a proposed rule amending various NCUA regulations to revise the threshold for federally insured credit unions to be assigned to the appropriate regulatory office.

The proposal would provide that covered credit unions with more than $10 billion but less than $15 billion in total assets (tier I covered credit unions) not currently supervised by the Office of National Examinations and Supervision (ONES), would remain subject to supervision by the appropriate Regional Office.

All covered credit unions with $15 billion and more in total assets (tier II and tier III covered credit unions), and tier I covered credit unions that are currently supervised by the ONES, would remain subject to supervision by ONES.

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

The board also heard a briefing on the National Credit Union Share Insurance Fund, which ended 2021 with a net income of 184.5 million. Its equity ratio ended 2021 at 1.26%.