Proposed ONES Supervision Threshold (Part 702 Subpart C)

Summary prepared March 20, 2022

NCUA has proposed changes to the threshold used to assign credit unions to the Office of National Examinations and Supervision (ONES). Under the current threshold of $10 billion in assets, there are 11 natural person credit unions (NPCUs) under ONES supervision with another 9 anticipated to cross that threshold and come under ONES supervision on January 1, 2023.

NCUA is proposing to raise the threshold for ONES supervision to $15 billion. If finalized as proposed, only 1 additional NPCU would come under ONES supervision in the next 2 years. NCUA also notes that currently, 3 on the existing 11 NPCUs under ONES supervision have assets between $14 billion and the proposed $15 billion threshold. NCUA proposes to grandfather those NPCUs and retain ONES supervision of the 3 as the agency believes it would be less disruptive than transferring supervision to the Regions until they reach $15 billion and then transferring supervision back to ONES.

Under the proposal, NPCUs with between $10 billion and $15 billion in assets (the existing Tier I covered credit unions) would remain under supervision their NCUA Regional office but would remain subject the additional rules applicable to Tier I credit unions.

The proposed rule is available here. Comments are due to NCUA on or before May 2, 2022. The proposed rule would apply to all federally insured credit unions. Part 702 Subpart C applies to FISCUs by reference in Part 741.3.

SUMMARY

For FISCUs, Part 741.3 requires compliance with Part 702. Part 702 in turn establishes capital planning and stress testing requirements for NPCUs with $10 billion in assets. Specifically, Part 742.300 (Subpart C) establishes 3 Tiers for NPCUs subject to capital planning and stress testing, with only Tier II and Tier III credit unions subject to the stress testing.

A NPCU that reached $10 billion or more in total assets on March 31 of a given year was reassigned to ONES on the first day of the following calendar year as a Tier I credit union.

In response to COVID-19 pandemic-related asset growth, in March 2021, NCUA promulgated the Asset Threshold Interim Final Rule which allowed NPCUs to use financial data as of March 31, 2020, to determine the applicability of certain regulations for calendar years 2021 and 2022. As a result, although several NPCUs crossed $10b inn assets during the pandemic, none were transitioned to ONES supervision for calendar year 2022.

NCUA’s proposal would now affect the capital planning or stress testing requirements for the NPCUs with assets great that $10 billion but would determine which NCUA office supervises then NPCU:

Covered Credit Union	NCUA Supervisory Office
Tier I assets > $10 billion	NCUA Regional Office unless currently supervised by ONES
Tier II assets > $15 billion < $20 billion, or otherwise designated Tier II by NCUA	ONES
Tier III assets > $ 20 billion or otherwise designated Tier III by NCUA	ONES

Because NCUA’s rules and regulations currently define the ONES jurisdiction as “covered credit unions” under Part 702, and with the change some “covered credit unions (those between $10 billion and $15 billion) would remain under Regional Supervision, NCUA must make a series of corresponding changes throughout its rules and regulations wherever it makes reference to ONES and Regional Directors with respect to jurisdiction of their respective supervisory programs. Those changes include:

700.2 – revise the definitions of ‘‘Regional Director’’ and ‘‘Regional Office’’ to read as follows: “Regional Director means the representative of NCUA in the designated geographical area in which the office of the federally insured credit union is located or, for ONES credit unions under part 702 of this chapter, the Director of the Office of National Examinations and Supervision. Regional Office means the office of NCUA located in the designated geographical areas in which the office of the federally insured credit union is located or, for ONES credit unions under part 702 of this chapter, the Office of National Examinations and Supervision.”
701.14(c)(3)(i) – revise to read as follows: “Where to file. Notices will be filed with the appropriate Regional Director or, in the case of a corporate credit union or a ONES credit union under part 702 of this chapter, with the Director of the Office of National Examinations and Supervision. All references to Regional Director will, for corporate credit unions and ONES credit unions under part 702 of this chapter, mean the Director of Office of National Examinations and Supervision. State-chartered federally insured credit unions will also file a copy of the notice with their state supervisor.”
702.302 – add a definition of ‘‘ONES credit union,’’ to read as follows: “ONES credit union means a credit union subject to supervision by the Office of National Examinations and Supervision and includes tier I covered credit unions that had $10 billion or more in total assets as of March 31, 2020, and tier II and tier III covered credit unions.”
708a.101 – revise the definition of ‘‘Regional Director’’ to include the following: “for corporate credit unions and natural person credit unions defined as ONES credit unions under part 702 of this chapter, Regional Director means the Director of NCUA’s Office of National Examinations and Supervision.”
708a.301 – same as above.
708b.2 – same as above.
750.6(a) – amended to read “* * * In the case of a Federal or state-chartered corporate credit union or ONES credit union under part 702 of this chapter, such written requests must be submitted to the Director of the Office of National Examinations and Supervision.”
790.2(c)(2) – revise the first sentence to read as follows: “* * * Similar to a Regional Director, the Director of the Office of National Examinations and Supervision manages NCUA’s supervisory program over credit unions; however, it oversees the activities for corporate credit unions and of natural person credit unions defined as ONES credit unions under part 702 of this chapter, in accordance with established policies. * * *

NCUA seeks comment on all aspects of the rule, but asked the following questions in the proposal:

What are the advantages or disadvantages of adjusting the threshold for determining which credit unions are supervised by ONES?
Should NCUA consider other amendments to its supervisory process for covered credit un-ions?
Is the definition of ONES credit union suffi-ciently clear?
Should the definition expressly state that it does not include Tier I covered credit unions that are not grandfathered
Should grandfathered covered credits unions be subject to Regional Office supervision un-til they become a Tier II covered credit un-ion?