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Aug. 24, 2018

Summary: NCUA should consider framework
for supplemental capital in RBC delay proposal

NCUA should employ its proposed delay of a risk-based capital rule to develop and issue a proposed regulatory framework for supplemental capital, NASCUS suggests in a summary of the delay for the capital rule.

In its summary of NCUA’s Risk-Based Capital Supplemental Rulemaking” (published last week on the NASCUS website), the association noted that consideration of a supplemental capital framework by the agency is one of several additional issues that NCUA does not specifically seek comment on but is something that NASCUS is evaluating for possible inclusion in formal comments.

The NCUA Board proposed changes to its risk-based capital rule at its meeting Aug. 2; comments are due Sept. 7. The agency has proposed (among other things) that it delay the effective date of the rule (adopted in 2015) from Jan. 1, 2019 to Jan. 1, 2020. The agency has also proposed amending the definition of a ‘‘complex’’ credit union for risk-based capital purposes by increasing the threshold from $100 million to $500 million in assets. The change would exempt an additional 1,026 credit unions from the risk-based capital requirements, according to the agency.

The NASCUS summary boils down the proposal to about two pages, including details on the effective-date delay and the amended definition of a complex credit union. The summary also outlines the changes the agency is proposing to the “Original Complexity Index (OCI)” in the rule, which assists in establishing the asset threshold at which a credit union is categorized as complex.

“NCUA’s OCI did not account for the volume of the complex activity indicator in each credit union,” the summary states. “After reviewing the rule, NCUA believes changes are necessary to better right-size the OCI. NCUA is proposing to revise the original complexity index (Revised Complexity Index ‘RCI’), and to apply a new Complexity Ratio (CR) for analyzing the portfolios of assets and liabilities of credit unions to determine the proper asset threshold over which credit union are ‘complex.’’’

In a chart, the summary notes that NCUA is amending six indicators: member business loans, participation loans, interest-only loans, Internet banking, investments with maturities greater than five years, and real estate loans. It also notes that NCUA is seeking comments in two areas: The increase of the asset threshold for “covered credit unions,” and the delay of the effective date.

NASCUS is considering comments in several other, unsolicited areas (including on a supplemental capital framework), the summary also notes, which are:

  • Consultation with State Regulators – Section 1790(l) of the Federal Credit Union Act directs NCUA to consult and cooperate with state regulators to implement PCA provisions. NCUA should use the delayed effective date to form a working group of state regulators to review comments and develop any further needed refinements for the rule. 
  • The 2015 Risk Weightings – The proposed supplemental rule does not address the original 2015 risk weightings for RBC. NCUA should review those risk weightings to ensure they accurately reflect material risk in light of the changing nature of the credit union system NCUA cites in proposing the changes in this proposal.
  • Appropriateness of using an Asset Threshold – NCUA asserts that the use of an asset threshold, rather than specific portfolio thresholds makes for ease of administration. NASCUS will evaluate if this is truly the best approach. 
  • Future Changes to Asset Threshold – As evidenced by this supplemental rulemaking, NCUA has noted in the preamble to the 2015 final rule, the agency may revisit the complexity indicators to determine the proper asset threshold for covered credit unions. NASCUS will consider whether the regulation itself should contain an explicit reference to formally re-evaluating the asset threshold.

NASCUS Proposed Rule Summary: NCUA Part 702: Risk-Based Capital Supplemental Rulemaking


Amending the transition requirements and scope of the current expected credit losses (CECL) standard issued by Financial Accounting Standards Board (FASB) is the aim of a proposal issued this week by the accounting group; comments are due Sept. 19.

According to a FASB release, the proposed “accounting standards update” (ASU) addresses areas of uncertainty brought to its attention by stakeholders to the CECL standard. The release added that the ASU is intended “to reduce transition complexity and represents our ongoing commitment to support a successful transition” to the group’s standards.

FASB said the proposal makes changes in two areas:

  • It would mitigate transition complexity by requiring entities other than public business entities (PBEs) to implement it for fiscal years beginning after Dec. 15, 2021, including interim periods within those fiscal years. “This would align the implementation date for their annual financial statements with the implementation date for their interim financial statements,” the FASB release stated.
  • It would clarify that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the leases standard, the release stated.

CECL is an accounting standard issued by FASB in 2016; it is scheduled to begin taking effect next year. As proposed, the CECL standard replaces the existing incurred-loss methodology for certain financial assets.

Generally, credit unions were expected to begin adopting the standard in 2020. However, according to reports, the proposed change would provide credit unions (and other non-PBEs) additional time than what the PBEs will receive to transition to the standard.

FASB proposes narrow-scope improvements to credit losses standard (CECL)


New rules on delivery of annual privacy notices take effect Sept. 17, including establishment of deadlines for institutions resuming annual notices if their practices change, and removal of a provision allowing for use of an alternative delivery method.

The amendments to Regulation P, adopted by the BCFP (formerly known as the CFPB) were published late last week in the Federal Register. The amendments come nearly three years after Congress acted to limit the delivery of annual privacy notices by some financial institutions, and just more than two years after the bureau proposed rules implementing the new law.

In its notice announcing the change to its Regulation P, the bureau noted that in December 2015, Congress amended the Gramm-Leach-Bliley Act’s (GLBA) requirements for annual privacy notices to allow financial institutions that meet certain conditions an exemption for sending annual notices. A financial institution can use the annual notice exception if it limits its sharing of customer information so that the customer does not have the right to opt out, and has not changed its privacy notice from the one previously delivered to its customer, the bureau noted.

However, if the institution does change its policy and loses the exemption, under the new rule it will have 100 days to provide the annual privacy notice. “The Bureau believes that the 100-day deadline will not impose undue or unreasonable costs on financial institutions, particularly since the delivery requirement is effectively a one-time burden absent additional changes to a financial institution’s policies and practices,” the agency wrote in its final rule.

The new rule also removes a provision that allows for use of the alternative delivery method. The agency said it did so because it believes “the alternative delivery method will no longer be used in light of the annual notice exception.” The alternative method included, under the previous version of the rules, posting the notice on a website of the financial institution.

(In January 2016, NCUA issued a Letter to Credit Unions (LTCU 16-CU-03) noting that federal examiners will only expect annual privacy notices to be provided if a credit union does not meet requirements including: The credit union’s policies and practices have not changed since it provided its most recent privacy notice to consumers, and; a credit union shares nonpublic personal information with nonaffiliated third parties only in accordance with requirements for certain existing GLBA exceptions. NASCUS developed a summary of the letter (members only)).

LINKS: BCFP pages, with news and updates

NASCUS 2016 summary: NCUA LTCU 16-CU-03, annual privacy letters (members only)


The nomination of the next director of the BCFP was recommended favorably, narrowly and along partisan lines (and after withering criticism by Democrats), by the Senate Banking committee Thursday. The next step is consideration by the full Senate. By a 13-12 vote – with only Republicans voting “yes” – the Senate Banking Committee voted to send the nomination of Kathleen “Kathy” Kraninger to the full Senate with a favorable recommendation to be permanent director of the bureau. If Kraninger’s nomination is confirmed by the full Senate, she would replace Acting Director John “Mick” Mulvaney, who has led the agency since November. Kraninger would succeed Richard Cordray as permanent director, who resigned in November.

Only two Republican members of the committee made statements in support of Kraninger at the hearing: Chairman Mike Crapo (Idaho) and Mike Rounds (S.D.). Crapo noted Kraninger’s experience in budget and oversight in backing her nomination. Rounds cited her “outstanding record of public service.” He criticized the current single-director governance of the agency, and urged that it be changed to a multi-member commission, with its budget subject to congressional oversight through the appropriations process. He said he believed that Kraninger would help in reforming the agency, which he said needed to be “reined in.”

Democrats leveled caustic criticism at Kraninger’s lack of experience in consumer protection, with six members of the committee offering statements in opposition to her nomination.


Voting was scheduled to conclude Thursday by members of a Nebraska-based federal credit union that wants to change to a state charter – issued by Iowa. According to press reports (including the local Omaha World-Herald, and, members of Cobalt FCU (based in Papillion, Neb.) were voting on whether to change the credit union’s charter from federal to an Iowa state charter. The $1 billion-in-assets credit union was making the change to allow it to expand its service area to two additional counties in Nebraska. While the credit union already serves five counties in Nebraska (and members in nine Iowa counties), the change would allow the credit union to begin serving members in two additional Nebraska counties, which include the state capital of Lincoln (in Lancaster County) and Fremont (in Dodge County), a city northwest of Omaha.

According to the press report, the Iowa charter would allow a credit union such as Cobalt to expand into more counties, something the Nebraska charter does not (and proposals in the state legislature to change those rules have failed to date). Also according to the press report, the credit union has said it has tried twice to expand its field of membership to Lancaster County (which includes Lincoln) under its NCUA-issued charter, but the change was denied by the agency because Lincoln is not a contiguous metropolitan area with Omaha.

Both the state of Iowa and NCUA have approved the proposed charter change; if the members vote to approve, the change would take place soon after. Until Aug. 1, Cobalt FCU was known as SAC FCU, founded in 1946 to serve members of the U.S. Air Force’s Strategic Air Command, based in Omaha.


Matthew J. Biliouris will oversee NCUA’s consumer financial protection policy and rulemaking efforts, among other things, in his new role of as the director of the agency’s Office of Consumer Financial Protection (OCFP), the agency said late last week. Aside from policy and rulemaking in consumer protection issues addressed by the agency, the office also oversees the agency’s fair lending examination program, consumer assistance center, and interagency coordination on consumer financial protection compliance matters. Biliouris was previously the acting director of the OCFP and before that served as its deputy director for five years. He is a 26-year veteran of the agency.

NCUA Selects Biliouris as Director of Consumer Financial Protection


NCUA is inviting credit unions interested in diversity issues and best practices for promoting greater diversity in financial services to attend the Financial Regulatory Agencies’ Diversity and Inclusion Summit Sept. 13, from 8 a.m. to 12:30 p.m. at the Federal Reserve Bank of New York, 33 Liberty Street, New York, N.Y.

The event will be jointly hosted by the Offices of Minority and Women Inclusion from the National Credit Union Administration, the Office of the Comptroller of the Currency, the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Securities and Exchange Commission.

According to NCUA’s website, the Summit will provide attendees with opportunities to:

  • Meet the OMWI directors from the federal financial regulatory agencies;
  • Hear updates on the implementation of the Joint Standards for Assessing Diversity Policies and Practices, developed pursuant to Section 342 of the Dodd Frank Wall Street Reform and Consumer Protection Act;
  • Gain insights about leading diversity practices in financial services from financial industry organizations and diversity champions, including Adrienne Collier, Diversity Program Manager, ESL Federal Credit Union; and
  • Network with colleagues in the financial services industry.

Online registration is open here. There is no charge to attend, NCUA said.

NCUA Invites Credit Unions to Diversity and Inclusion Summit


Positioning the credit union system for the future by leveraging a robust dual charter framework was the aim of a unique, NASCUS-hosted meeting last week in Chicago which included state regulators and representatives of the nation’s largest credit unions, both state and federal chartered. The invitation-only “Regulators-Credit Unions Exchange,” Aug. 15-16, included representatives of the nation’s largest credit unions as well as selected state regulators and selected NASCUS Credit Union Advisory Council members. NCUA Chairman Mark McWatters and agency Chief of Staff Sarah Vega joined the dialogue among credit union practitioners and state regulators. The session looked at a variety of issues, including: meaningful supervision for the largest credit unions; ensuring optimum NCUA examinations including effective defenses against cybersecurity threats and information transmission vulnerabilities; BCFP powers, unintended consequences of bureau rule-making, and appropriate enforcement authority; fintech ramifications in the credit union space; FOM (particularly in the digital and social media age and in the context of “well-defined local communities” going forward); and interstate branching. Credit unions from the NASCUS Credit Union Advisory Council membership represented institutions with assets of more than $10 billion, approaching $10 billion, as well as $200 million credit unions.

ON THE ROAD: With directors in WI

Cybersecurity, director and officer liability, BSA, key national issues and other hot topics were all on the agenda this week as NASCUS hosted a Directors’ College in Madison, Wis., in conjunction with the Wisconsin Department of Financial Institutions and the Wisconsin Credit Union League. The one-day sessions 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. (In the photo: NASCUS EVP and General Counsel Brian Knight leads a session for the group.)

NASCUS 2018 Education Agenda (including upcoming Directors’ Colleges and more)

BRIEFLY: Payday lending rule to proceed

A federal judge last week again sided with consumer groups when he denied a request by the BCFP and a group representing payday lenders to delay the agency’s payday lending rule. The Community Financial Services Association of America filed suit in April challenging the agency’s rule, which was issued by former agency Director Richard Cordray. In its 2016 comment letter on the issue, NASCUS noted that it “shares the Bureau’s commitment to ensuring that consumers are protected from predatory and abusive lending practices.” However, NASCUS also noted concern that the rule “will limit the ability of state-chartered credit unions to administer innovative alternative short dollar loan programs.” In January, BCFP stated it intends to engage in a rulemaking process so that it may reconsider the payday rule.

NASCUS Comments: CFPB Proposed Rulemaking on Payday, Vehicle Title and Certain High-Cost Installment Loans

Ruling on payday lending rule, U.S. District Court for Western District of Texas (Austin)

Information Contact:
Patrick Keefe,