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July 27, 2018

NCUA to consider 2 proposed rules,
including on risk-based capital

Two proposed rules -- on risk-based capital, and on clarifying existing rules for loans to members -- and a final rule on procedures agency contractors must follow, will be considered by the NCUA Board when it meets Thursday.

A “mid-session 2018” budget review, and continuation of the federal credit union lending interest rate ceiling, will also be under consideration during the meeting.

UPDATED: Regarding risk-based capital, the agency offered no additional details. However, reports circulated Friday that — in a letter to two members of the House Financial Services Committee — NCUA Board Chairman J. Mark McWatters indicated that the proposal would delay the effective date of the regulation by one year, to Jan. 1, 2020. The letter was reportedly addressed to Reps. Bill Posey (R-Fla.) and Denny Heck (D-Wash.).

McWatters also reportedly indicated that the proposal would change the definition of a complex credit union from $100 million to $500 million, and that the proposal would be issued for a 30-day comment period.

With regard to the loans to members proposal, the unified agenda notes that the agency is proposing clarifications to its regulation governing loans and lines of credit to members (under section 701.21 of the agency’s rules).

In other action, the NCUA Board plans to:

  • Consider a final rule on suspension and debarment procedures for contractors doing business with the agency. Proposed in March, the final rule would set out an administrative process for suspending and debarring contractors that do not meet threshold criteria designed to protect the government's interest in avoiding waste, fraud, abuse and poor performance, according to NCUA. The rule would also seek public comment on the process.
  • Ponder whether to continue the loan interest rate ceiling for most loans made by federal credit unions, which the board is required to do under the law every 18 months. The rate is now set at 18% (set in February 2017). The board must either affirm that rate or set a new one by Sept. 10.
  • Hear an update of the agency’s spending performance under the current budget as of mid-year.

The board meeting gets underway at 10 a.m. Thursday at NCUA headquarters in Alexandria, Va.

NCUA Board meeting agenda, Thursday Aug. 2


In its comment letter to agency on the supplemental capital ANPR last year, NASCUS wrote that the state credit union system supports NCUA’s proposal to issue a rule on alternative capital – and the agency should do so, because it’s the right thing to do.

“It is incumbent on supervisory authorities to not just do the popular and the easy, but to also do what is right,” NASCUS President and CEO Lucy Ito wrote in the association’s official comment letter on the proposal in 2017. “As with NCUA’s derivatives rule, supplemental capital is the right thing to do. It is a potentially valuable ‘tool in the tool box’ of credit unions’ and regulators’ risk management, provides a capital buffer, and serves as a counter-cyclical means to maintain service to members.”

Ito also noted in the letter that, from a supervisory perspective (particularly one that also includes a perspective of a deposit insurer supervisor), “more capital, at risk and junior to the share insurance fund, is almost always better than less capital.”

NASCUS comment letter: 2017 NCUA Alternative Capital ANPR

NASCUS Summary: NCUA Alternative Capital ANPR


NCUA wants to extend a requirement that federally insured credit unions (FICUs) seeking to buy assets or assume liabilities from a privately insured credit union (PICU), or other non-FICU financial institution, must submit a letter to the local regional director outlining the transaction before it is approved. The renewal of the “information request” was issued this week for a 60-day comment period; comments are due Sept. 24.

According to the notice published in the Federal Register Thursday, NCUA said under its regulations FICUs must seek approval from the agency before buying assets or assuming liabilities of a PICU or other financial institution.

“A FICU seeking approval must submit a letter to the appropriate NCUA Regional Director stating the nature of the transaction, and include copies of relevant transaction documents,” states the Register notice, known as an “Agency Information Collection Activity Approval.” “Relevant transaction documents may include, but are not limited to: the credit union’s financial statements, strategic plan, and budget, inventory of the assets and liabilities to be transferred, and any relevant contracts or agreements regarding the transfer.”

In the notice, NCUA said it uses the information it gleans from the letter to regional directors to “determine the safety and soundness of the transaction and risk to the National Credit Union Share Insurance Fund (NCUSIF).”

The agency noted that it has increased its estimate of the “regulatory burden” placed on FICUs for filing the requests. Referring to its estimate of the time necessary for FICUs to file the requests, the agency wrote that it “has increased the time necessary to prepare and assemble the cover letter and the required transaction documents to reflect a more accurate accounting of burden associated with this reporting requirement.”

Agency Information Collection: Purchase of Assets and Assumption of Liabilities


The efforts in Congress to delay the implementation of NCUA’s risk-based capital rule took a hit this week when a Senate-House conference committee decided not to include the postponement in a final 2019 defense authorization bill. However, a push to put off the rule by two years continues in other legislation.

In considering H.R. 6147, the fiscal 2019 National Defense Authorization Act (NDAA), Senate-House conferees decided not to include a provision from the House version that would have delayed the rule, which revises the agency’s “prompt corrective action” regulations, replacing the current risk-based net worth requirement with a new risk-based capital ratio for federally insured credit unions. (On the other hand, the conference-approved version also doesn’t include a previously House-passed provision requiring the Department of Defense (DoD) to allow banks to operate on military installations rent-free.)

But other avenues may remain open to delaying RBC to 2021, in perhaps two areas. The House and Senate will have to go to conference to resolve differences in their respective spending bills (the Financial Services and General Government Appropriations Act for Fiscal Year 2019). The House version contains the postponement of the rule, the Senate version does not. A final deal could be reached in conference that includes the House provision. Meanwhile, last week the House passed the “Jobs 3.0” bill (S.488), a broad, bipartisan capital-formation measure that also includes the RBC delay. The bill is headed for the Senate, where Leader Mitch McConnell (R-Ky.) has committed to bring it up for a vote.


Meanwhile, the House Financial Services Committee was again busy this week (the last week the House is in session before a five-week summer break – which began Thursday), approving measures to protect financial technology and digital currencies, and amend the definition of mortgage lending fees (among other things).

Details include:

  • The Financial Technology Protection Act (H.R. 5036) requires a report from federal financial institution regulators (including NCUA) on potential uses of digital currencies and other emerging technologies by “rogue” and foreign actor for illicit activities (including evading sanctions and conducting money laundering, among other things), as well as a strategy for mitigating such illicit uses. It also sets up a task force (the “Independent Financial Technology Task Force to Combat Terrorism and Illicit Financing”) to enhance coordination between private and public sectors to research and develop legislative and regulatory proposals to decrease terrorist and illicit use of new financial technologies, including digital currencies. The bill also establishes a “FinTech Leadership in Innovation and Financial Intelligence Program,” which would provide grants for development of “tools and programs to detect terrorist and illicit use of digital currencies administered by the Task Force.”
  • The Mortgage Fairness Act (H.R. 2570) amends the Truth in Lending Act (TILA) to revise the definition of “points and fees” under a high-cost mortgage. It excludes compensation paid in setting the interest rate and for which the consumer was not separately charged, and includes compensation paid by a consumer or creditor to an individual employed by or contracting with a mortgage originator.

The bills will now head to the House floor for further consideration.

Markup of H.R. 2570, H.R. 5036


Crypto assets, fintechs, global standards, credit unions serving cannabis businesses and more were on the agenda this week when credit union regulators from around the world gathered in Ireland to discuss current and emerging issues – with NASCUS President and CEO Lucy Ito in attendance and participating in the program.

The International Credit Union Regulators Network (ICURN) met in Ireland Wednesday through Friday to discuss the issues. The meeting included representatives from Ireland, the United Kingdom, United Arab Emirates, Moldova, India, Kenya, Canada, Australia, Brazil, Swaziland, and more.

NASCUS’ Ito led a session titled “Supervision of Credit Unions Working with Cannabis Businesses,” reflecting state supervisory authorities’ interest in sound regulatory policy as marijuana is legalized in more states. NCUA also participated, with Deputy Executive Director John Kutchey discussing “RegTech and the Role of Machine-Based Monitoring.”

Other sessions at the three-day gathering included: striking the balance of hard power and soft power in supervision; the role of a central credit union; balancing financial consumer protection and prudential concerns; and a Financial Stability Institute study on financial cooperatives around the world.


With the second half of the year underway, NASCUS is gearing up its education program with a full slate of events, including our annual conference on Bank Secrecy Act (BSA) latest developments, as well as examiner schools, directors’ colleges and industry days.

The NASCUS/CUNA BSA Conference – widely recognized as the premier credit union educational event focusing on anti-money laundering developments and BSA compliance – takes place Nov. 5-8 in Louisville, Ky. Among the timely topics scheduled to be discussed at the event: De-risking and the importance of financial inclusion; identity theft red flags and BSA/AML compliance; avoiding personal liability under BSA; human trafficking; digital currencies; cannabis banking; fintech impact on bank/customer relationships – and more.

NASCUS’ slate of directors’ schools and executive forums during the second half of the year gets underway Aug. 22 in Madison, Wis., with at least four more scheduled in other states. NASCUS directors’ colleges are among the only venues in the credit union meeting space where credit union directors — along with senior credit union staff — can hear first-hand from state regulators and learn of their expectations of credit union directors, and the issues that directors will confront, including BSA requirements, cyber security, succession planning, interest rate risk, national issues and much more. Other colleges over the next six months include those in: Denver, Sept. 18 (Colorado Executive Forum); Sept. 18, Reynoldsburg, Ohio (Ohio Directors’ College); Nov. 13, Overland Park, Kansas (Kansas/Missouri Directors College); Dec. 4, Nashville, Tenn. (Tennessee Directors’ College, presented in partnership with the Tennessee Credit Union League).

Two more examiner schools sessions are also planned for the second half of the year. These multiple-day schools offer state examiners a complete look at the ever-changing regulatory environment, with a thorough run-down of the impact on federally insured, state-chartered credit unions from new or proposed federal regulations. The Ohio Examiners School is set for Oct. 10-11 in Columbus; the Michigan Examiners School is set for Oct. 15-19 in Ann Arbor.

Finally, two industry days are also on the schedule – in Ohio and Michigan. These intense, one-day sessions offer an up-close look at the state regulatory agenda and practices for credit union leaders — board and executive staff — hosted by NASCUS in conjunction with local state supervisors. The Ohio session is set for Oct. 9 in Columbus (in partnership with the Ohio Credit Union League); the Michigan session is Oct. 16 in Ann Arbor. For more information, including registration and schedules, see the link below.

NASCUS Education Calendar, 2018 (second half)

BRIEFLY: Before leaving, House passes flood insurance bill

The House this week passed legislation that would prevent a lapse of the National Flood Insurance Program before it expires next Tuesday (July 31). Senate Majority Leader McConnell Thursday on the bill, but the next votes scheduled in the chamber are late Monday afternoon.

Information Contact:
Patrick Keefe,