NCUA approves interim final rule regarding corrective action regulations

Agency Rule-Making & Guidance NCUA Credit Union Covid-19

On May 21, the NCUA approved an interim final rule (IFR) making two temporary changes to its prompt corrective action regulations to provide relief for credit unions that temporarily fall below the well-capitalized level due to the Covid-19 pandemic. The first change will temporarily reduce the earnings retention requirement for “adequately capitalized” credit unions, and will allow these credit union to decrease earnings retention amounts without submitting a written application requesting approval. Credit unions that exhibit material safety and soundness concerns or pose an undue risk to the Share Insurance Fund may be required to submit an earnings transfer waiver request. The second change will temporarily allow undercapitalized credit unions to submit streamlined, “significantly simpler” net worth restoration plans, provided the credit union is able to demonstrate that the reduction in capital was primarily caused by share growth and that such share growth is a temporary condition due to the Covid-19 pandemic. The IFR’s temporary changes will expire December 31, 2020, and take effect upon publication in the Federal Register. Comments will be received for 30 days.

The same day, the NCUA also approved a proposed rule to amend its share insurance regulation, which governs the requirements for a share account to be separately insured as a joint account. Specifically, the proposed rule will provide an alternative method for credit unions to satisfy the membership card or account signature card requirement by “explicitly provid[ing] that the signature-card requirement could be satisfied by information contained in the account records of the insured credit union establishing co-ownership of the share account.” Comments on the proposed rule are due 30 days after publication in the Federal Register.