NCUA has confirmed that it will weigh community development credit unions allowance for loan losses more heavily when it evaluates their applications for funds under the U.S. Treasury Department's Community Development Capital Initiative.
The CDCI is a program through which the Treasury is making capital loans to community development financial institutions from Troubled Asset Relief Program funds. The program relies on financial institution regulators to make the initial determination of which CDFIs are viable and able to use the funds. The NCUA has played that role for credit unions.
In an April 13 letter to the National Federation of Community Development Credit Unions, Tawana James, the NCUA's director of Small Credit Union Initiatives, wrote about the agency's changed approach.
"The main issue we have resolved is how to fulfill Treasury's requirement to screen institutions with significant non-performing loans," James wrote. "NCUA has adjusted its evaluation criteria with respect to non-performing loans. Our new formula will give greater weight to [Low Income Credit Unions'] cushion against delinquencies even in worst-case scenarios.
Today, I am pleased to report that our new formula was accepted by the Treasury."
