CUNA Regulatory Advocacy Report

RBC2: First Look

At Thursday’s Board meeting, NCUA voted 2-1 to release for comment a second version of its Risk-Based Capital Proposal. This re-issued proposal (RBC2) includes substantial changes from last year’s version. Here’s what you need to know: 

  • Who is covered? About a thousand fewer credit unions. The asset size threshold for RBC coverage was raised from $50 million to $100 million, reducing the number of credit unions covered from 2,237 to 1,455. CUNA urged that the number of credit unions affected by the RBC rule be reduced by raising the asset size at which credit unions are covered.
  • What does it take to be well-capitalized? Less capital. The RBC requirement was lowered from 10.5% to 10%. CUNA urged that the 10.5% requirement for a credit union to be well capitalized be reduced or eliminated. CUNA continues to maintain that the requirement to be well-capitalized can be no higher than the requirement to be adequately capitalized under the Federal Credit Union Act.
  • Are the risk weights the same? No. Most of the risk weights have been lowered to some degree, including in the areas of mortgage loans, member business loans, and long-term investments. Mortgage servicing assets remain the same, however, as reflected in the first proposal. CUNA remains concerned that a number of the risk weights are still too high, and will continue to advocate for better treatment.
  • Is interest rate risk still part of the new RBC system? No. NCUA indicated it will be dealt with in guidance or a future rulemaking, potentially later this year. CUNA urged that interest-rate risk be removed from the new RBC system, but remains concerned about any potential new rule. Credit unions should be trusted to manage their own assets and liabilities appropriately.
  • Can examiners still require my credit union to hold more capital? No, but the NCUA Board can. The “individual minimum capital” requirement has been removed, but the NCUA Board will retain its existing authority to take action on capital levels beyond the confines of the proposed rule. Also, there is a new proposed requirement that complex credit unions have a capital adequacy plan under which based on their own period assessments, reviewable by examiners, that more capital than what the rule actually calls for could be required. CUNA is reviewing this new provision carefully.
  • Will my 1% NCUSIF deposit count toward the 10% it takes to be well-capitalized? No. Despite the fact that credit unions get their 1% deposit back if for any reason they leave the share insurance fund, NCUA still does not allow this to be treated as an asset for purposes of RBC.
  • What about goodwill? Important for credit union mergers, certain goodwill already on the books will continue to be counted until 2025. CUNA urged that goodwill be included as capital under RBC.
  • How long will my credit union have to comply? Almost four years—until January 1, 2019. This is a major improvement from the first proposal, which required compliance in only 18 months.

For additional information on RBC2, visit CUNA’s RBC Action Center and RBC Blog.

CFPB Now Accepting Applications for Advisory Board and Councils

Last week, the CFPB announced that it is now accepting applications forthe Consumer Advisory Board, the Credit Union Advisory Council, and the Community Bank Advisory Council. For 2015, there are 10 seats that will become vacant this fall on the Consumer Advisory Board, and 8 seats that will become vacant this fall on the Credit Union Advisory Council.  For those interested in applying for appointments to either the Consumer Advisory Board or the Credit Union Advisory Council, the agency has made available a list of  Frequently Asked Questions , as well as the  application  that must be completed. Applications are due by February 28.

We encourage credit unions interested in applying for either group to work with your league and CUNA as you prepare your application. Please feel free to contact Mary Dunnor Jared Ihrighere at CUNA for additional information or any questions you may have. 

Final Reminder: CUNA Seeks Feedback by January 23 on Same Day ACH Proposed Rule, Small Credit Union Impact

CUNA is very interested in feedback from all credit unions on our Comment Call regarding NACHA’s Same Day ACH proposed rule. We are especially concerned about the impact of the rule on small credit unions (e.g., institutions with less than $50 million in assets), or credit unions that may close earlier in the day or have more limited hours. We need your input by this Friday to help with CUNA’s advocacy efforts.

Specifically, all Receiving Depository Financial Institutions (RDFIs), including credit unions regardless of asset size, would be required to receive Same Day ACH payments in order to provide certainty to Originators desiring same-day processing and settlement.

The proposed rule would provide a new, ubiquitous capability for moving ACH payments faster. Currently, most ACH payments are settled on the next business day; current ACH schedules and capabilities would continue to apply to transactions that are not designated as Same Day ACH. The proposal would amend the NACHA Operating Rules to enable the option for same-day processing of virtually any ACH payment (for all types of credits and debits) except for international transactions and individual transactions above $25,000. 

CUNA and our Payments Subcommittee have reviewed the proposed rule in detail to assess the potential impact, including the costs and benefits for credit unions. We continue to meet and discuss Same Day ACH and faster payments issues with NACHA, the Federal Reserve Banks, financial trade associations, corporate credit unions, and other key stakeholders. For further information and our summary of the rule changes, please visit the CUNA website. 

Summary of Last Week’s NCUA Board Meeting

In addition to RBC2, at last week’s meeting, the NCUA Board approved: (1) a proposed rule that would adjust the timing of the planning and testing cycles for NCUA’s capital planning and stress testing rule, (2) the agency’s 2015-2016 Annual Performance Plan, and (3) a request from Windsor Locks, CT-based 360 Federal Credit Union to convert to a community charter.

NCUA Capital Planning and Stress Testing Schedule Shift Proposed Rule: The Board approved for a 60-day comment period a proposal to amend the credit union capital planning and stress testing rule, by adjusting the timing of certain events in the planning and testing cycles. NCUA plans to base its scenarios on those developed by the federal banking regulators (Federal Reserve, FDIC, and OCC) for their regulated institutions. The NCUA Board approved a final rule on capital planning and stress testing in April 2014, and the federal banking regulators subsequently changed their scenario release dates. NCUA is now proposing to modify its stress-testing schedule to incorporate the changes made by the banking regulators. NCUA has proposed an effective date of January 1, 2016.

NCUA 2015-2016 Annual Performance Plan: The Board approved the agency’s 2015-2016 Annual Performance Plan, which along with its operating budget, outlines the resources and strategies NCUA will use to achieve agency priorities and improve agency performance. The Plan includes the following strategic goals: (1) ensure a safe, sound, and sustainable credit union system; (2) promote consumer protection and financial literacy; (3) further develop a regulatory environment that is transparent and effective, with clearly articulated and easily understood regulations; and (4) cultivate an environment that fosters a diverse, well-trained and motivated staff.

Community Charter Conversion; Interesting Comments by Chairman Matz: The Board approved 360 Federal Credit Union of Windsor Locks, CT, to convert to a community charter. Prior to adding an underserved area in 2004, the credit union served only the employees of Hamilton Standard Corporation. The credit union will now serve the Hartford-West Hartford-East Hartford, CT Metropolitan Statistical Areas that encompasses a population of about 1.2 million people.

While Questioning NCUA staff presenting the charter conversion, NCUA Chairman Matz referenced American Eagle Federal Credit Union that had previously been approved for a similar community charter and was now converting to a state charter. In asking the staff why American Eagle converted to a state charter, Chairman Matz asked whether NCUA’s “field of membership rules are too restrictive.” To which the NCUA staff member agreed. Chairman Matz followed up by saying that, “It’s clear that we need to take a fresh look at modernizing our field of membership regulation.” 

Chairman Matz announced a field of membership working group at December’s Board meeting. We feel her exchange with NCUA staff describing NCUA rules as too restrictive is a positive first step in what we hope are improvements to NCUA’s field of membership rules. CUNA will be working closely with members, leagues, and NCUA in the upcoming months to provide input to NCUA on how the agency can improve its field of membership rules.

CUNA Files Letter in Support of IRS Proposal on Discharge of Indebtedness

Last week, CUNA filed a letter with the IRS in support of proposed changes to the IRS regulation regarding discharge of indebtedness. Specifically, the proposal would amend the regulation to no longer provide that a deemed discharge of indebtedness, for which a Form 1099–C (Cancellation of Debt) must be filed, occurs at the expiration of a 36-month non-payment testing period.

We believe the proposed change could result in reducing the regulatory compliance burden on reporting entities, including credit unions, in assessing whether a debt has been discharged. In addition, we believe the proposal may alleviate some taxpayer confusion that has resulted under the existing regulation. 

The IRS did not offer an effective date for the proposed removal of the non-payment testing period rule. However,since the proposed changes may reduce consumer confusion and should afford reporting entities at least some relief,we requested the IRS make the proposed changes as soon as finalized. 

NCUA to Make Cyber Security a Priority in 2015

This month’s NCUA Report highlights NCUA interest for the New Year in ensuring credit unions are adequately protected from cyber threats. NCUA examiners will be “reviewing credit unions’ ability to manage information security, including their capacity to detect cyber-attacks and perform sound due diligence with regard to any third-parties that handle credit union data.”

NCUA’s focus will be on credit unions’ ability to recover from a security breach. Appendix B to NCUA Rules and Regulations Part 748 provides guidance on developing an incident response program that can help a credit union react to a breach. These programs can help the credit union assess the nature and scope of an incident, determine when to contact law enforcement and notify members, and take steps to safely resume operations.

Current CUNA Regulatory Calls to Action

  • NACHA Issues Same Day ACH Proposal (comments due by February 6)
  • CFPB Proposes Safe Student Account Scoreboard (comments due by March 16)
  • CFPB Proposes Prepaid Card Rule (comments due by March 23)

For other items of interest, visit CUNA’s Regulatory Advocacy page.

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