NCUA Board Meeting Summary- September 23, 2021

The National Credit Union Administration (“NCUA”) held a scheduled Board meeting yesterday. A summary of the meeting follows.

Share Insurance Fund Quarterly Report

The report on the Share Insurance Fund showed total income of $60 million and net loss of $46.3 million for the quarter ending 6/30/2021. The balance sheet indicated total liabilities and net position of $19.825 billion, an increase of $52 million from the previous quarter. The Fund’s reserve balance stands at $161.1 million as of the end of the second quarter, with $9.1 million being for specific reserves. So far this year, there have been three credit union failures, at a cost of $36.8 million to the Fund. The number of CAMEL Code 4/5 credit unions decreased slightly from the preceding quarter to 144; CAMEL Code 3 credit unions increased slightly to 764.

As of June 30, the equity ratio of the Fund is 1.23%, a decrease from 1.26% as of December 31, 2020. According to staff, the six-month projection for the ratio is 1.28% for the period ending December 31, 2021. The projected increase is a result primarily of a lower projected increase of insured shares, as well as the effect of the semi-annual capitalization deposit true up, which will be collected in October.

2021 Mid-Session Budget

The Board approved several reprogrammings related to the 2021 budget as well as the hiring of additional staff.

Approximately $28.6 million in excess budget is currently projected for 2021, absent any reprogramming actions taken by the Board. The approved reprogrammings listed below would cost the NCUA an estimated $2.4 million in 2021, while employee leave payouts will cost approximately $1.6 million. Therefore, the residual budget balance for 2021 is currently projected to be approximately $24.6 million and can be used to offset future budget needs.

  1. Reprogramming $906,780 from the projected 2021 Travel surplus to the Contract Services budget to pay for additional cybersecurity support;
  2. Reprogramming $939,686 from the projected 2021 Travel surplus to the Administrative Expenses budget to pay for anticipated employee relocations;
  3. Reprogramming $550,000 from the projected 2021 Travel surplus to the Contracted Services budget to pay for additional human capital analytical support;
  4. Reprogramming $40,000 from the projected 2021 Travel surplus to the Contracted Services budget to pay for executive briefings and analysis support; and
  5. Seven additional full-time positions: two for the Office of the CIO to provide additional cybersecurity expertise and capabilities, one for the Office of the Executive Director to coordinate cybersecurity activities and programs internal and external to the NCUA, one for the Board Secretary to ensure efficient NCUA Board operations, and three for the Office of Ethics Counsel to improve the NCUA’s compliance programs for ethics laws and standards.

Oregon Member Business Lending Rule

The Board determined the Oregon MBL rule covers all of the provisions and is no less restrictive than the requirements in NCUA’s Part 723, thus exempting Oregon state-chartered credit unions from compliance with NCUA’s MBL regulation.

NCUA Board Agenda

In a 2-1 vote, with Chairman Harper dissenting, the Board approved Board Member Hood’s request to add the following items to the 2021 NCUA Board agenda:

  1. CUSOs final rule (to be placed on the October Board meeting agenda).
  2. FOM Shared Facility Requirements final rule (to be placed on the November Board meeting agenda).
  3. Mortgage Servicing Rights final rule (to be placed on the December Board meeting agenda).

Prior to becoming chair, Chairman Harper opposed each of these proposed rules when brought to a vote by former Chairman Hood. Chairman Harper reiterated his concerns with these three proposed rulemakings, though signaled he could support some of them in final form if they include certain changes. While it is typically the Board chair that adds items to the Board agenda, the FCU Act permits the other members to bring items before the Board.

Proposed Rule – Subordinated Debt

The Board issued a proposal to amend the Subordinated Debt rule, which becomes effective January 1, 2022. The proposal would amend the definition of “Grandfathered Secondary Capital” to include any secondary capital issued to the U.S. Government, under an application approved before January 1, 2022, regardless of the date of issuance. The proposed change would benefit eligible LICUs that are either participating in Treasury’s Emergency Capital Investment Program or other federal programs that can be used to fund secondary capital, if they do not receive the funds for such programs by December 31, 2021. The proposal would also provide that the expiration of regulatory capital treatment for these issuances is the later of 20 years from the date of issuance or January 1, 2042.

NCUA will accept comments on the proposal for 30 days following publication in the Federal Register.