The League Supports NCUA’s Interim Final Rule on Prompt Corrective Action
Published by: Emily Leite
June 16, 2021 | Regulatory
Throughout the COVID-19 pandemic, the National Credit Union Administration (NCUA) has worked tirelessly to adjust its regulations to decrease the regulatory burden on credit unions. One burden that credit unions have faced is the historic influx of share growth due to a variety of factors, such as the payment of federal stimulus dollars to their members and “flights to safety” as some credit union members transfer funds from riskier investments to take advantage of the federal deposit guarantee offered by the National Credit Union Share Insurance Fund. To address this issue, on May 28, 2020 NCUA issued an interim final rule on temporary revisions to its Prompt Corrective Action (PCA) regulations in response to the potential PCA challenges credit unions may have faced during the pandemic and the resulting economic crisis. Laudably, on April 19, 2021 NCUA has decided to extend these revisions even further.
As with the previous interim final rule, NCUA’s current PCA publication makes two temporary changes to its PCA regulations to help ensure that federally insured credit unions (FICUs) remain operational and liquid during the COVID-19 pandemic. The first amends these regulations to temporarily enable the NCUA to issue an order applicable to all FICUs to waive the earnings retention requirement for any FICU that is classified as adequately capitalized. The second modifies these regulations with respect to the specific documentation required for net worth restoration plans (NWRPs) for FICUs that become undercapitalized. These temporary modifications will be in place until March 31, 2022.
The League applauded NCUA’s extension of these temporary measures in its June 16 comment letter. We appreciate that the agency ultimately listened to feedback from stakeholders and understood the need for further regulatory relief beyond its initial deadlines. As credit unions continue to deal with the unprecedented shifts in the economy beyond the official end of the pandemic, it’s important for the NCUA to remain flexible in its regulations, and the League will continue to advocate for that position. If you have any questions about the PCA interim final rule or the League’s comment letter, please contact League Regulatory Counsel Chris Noble, Esq. at cnoble@ohiocul.org.
