NCUA’s New Rules in 2013: Year in Review
The NCUA adopted key new rules in 2013 concerning liquidity, CUSOs and fixed assets.
The liquidity rule, approved at the NCUA’s October board meeting, requires federally insured credit unions with more than $50 million in assets to adopt a contingency funding plan to address liquidity shortfalls during emergency situations.
FICUs with fewer than $50 million in assets have to maintain a basic written policy that provides a credit union board-approved framework for managing liquidity.
Credit unions with assets fewer than $50 million also have to provide a list of liquidity sources that can be employed under adverse circumstances, according to the board action memorandum presented at the agency’s October board meeting.
Under the final rule, FICUs with more than $250 million in assets are required to have access to a backup liquidity source for emergency situations from the NCUA’s Central Liquidity Facility or the Federal Reserve’s discount window.
Credit unions in this asset category must apply with either liquidity source by March 31, 2014, to be in compliance with the rule.
“This is to make sure that in a downturn or if a credit union has an adverse event, that they will be able to access liquidity very quickly. It protects the credit union and it protects the system,” NCUA Chairman Debbie Matz said.
In 2013, the NCUA also increased the definition of small credit unions from $10 million in assets $50 million, which also impacted the liquidity rule.
The board also finalized a CUSO rule at the November meeting, which expands the NCUA’s ability to examine CUSO financials and other organization details. The rule also requires federally insured state-chartered credit unions to comply.
“The final rule also includes limits on the ability of less than adequately capitalized FISCUs to recapitalize their CUSOs. In addition, it adds several new requirements that apply to both federal credit unions and FISCUs. Specifically, all CUSOs are required to annually provide basic profile information to NCUA and the appropriate state supervisory authority,” according to the NCUA board action memorandum.
“CUSOs engaging in certain complex or high-risk activities are required to additionally report more detailed information, including audited financial statements and customer information. The final rule also requires all subsidiary CUSOs to follow applicable laws and regulations.”
The NCUA’s 2014 budget included a total of $750,000 for system development costs to implement the CUSO rule.
Costs in 2015 to finalize development, which include system documentation, training, acceptance testing, and other system deployment costs, are estimated to be no more than $650,000, according the NCUA.
“This estimate will be refined in part based on actual costs and progress of system development in 2014 and considered by the Board as part of the annual budget development process for 2015,” the agency said at the meeting.
Under a fixed asset rule finalized in September, any waiver of the 5% aggregate limit on fixed assets is considered a one-time event by the NCUA.
“An FCU with an approved waiver will be required to submit a new waiver request and supporting documentation for any future investment in fixed assets which exceeds an additional one percent of its shares and retained earnings over the amount approved,” the NCUA said in its board action memorandum.
The NCUA board also approved a final rule at the January board meeting that would allow the federal regulator to declare a state regulated, federally insured credit union to be in “troubled condition,” which was previously an authority only granted to state regulators.
A final rule expanding the maximum threshold for rural district field of membership populations to 250,000 from the existing 200,000 maximum was also approved in February.