New Fixed Assets Proposal From NCUA: Onsite Coverage
WASHINGTON - The NCUA approved a proposal Thursday at the agency’s monthly board meeting that would remove any limits associated with the level of fixed assets.
The NCUA received 36 comments on the original fixed assets proposed rule, which was approved at the NCUA board meeting in July of last year.
“While most supported additional flexibility, many also said that neither the 5% aggregate threshold or the Fixed Asset Management process were needed,” NCUA Board Vice Chairman Rick Metsger said. “Today the board is taking those comments to heart by issuing a new rule incorporating both of those suggestions.”
Intended to provide regulatory relief for credit unions, the new proposal eliminates a provision in the current fixed assets rule that establishes a 5% aggregate limit on investments in fixed assets for federal credit unions with $1 million or more in assets.
The new proposal also eliminates the provisions in the current rule related to waivers from the aggregate limit.
“In addition, the proposal simplifies the fixed assets rule’s partial occupancy requirements for federal credit union premises acquired for future expansion by establishing a single six-year time period for partial occupancy of such premises and by removing the 30-month requirement for partial occupancy waiver requests,” according to the board action memorandum.
NCUA Board Chairman Debbie Matz said each credit union would have to set a fixed asset level that is reasonable.
Metsger said the agency had to propose a new rule because the revisions go beyond the scope of the July 2014 proposal. The revised proposed rule is being put out for a 30-day comment period.
“The main reason we don’t need to micromanage in this area is that credit unions and their management have a built-in incentive not to invest in assets on which they can’t earn a return,” he said. “This issue is largely self-regulating because credit unions want to earn a return for their members on every dollar they possibly can, and fixed assets don’t earn the return that a good loan provides.”
NCUA Board Member J. Mark McWatters said he thought the last proposal was increased regulation but the revised version is a move in the right direction.
If the NCUA board finalizes the 2015 proposal, the agency plans to issue an updated supervisory guidance to examiners that would be shared with credit unions. The guidance would outline expectations for a credit union to demonstrate appropriate due diligence.
“The guidance will ensure examiners effectively identify any risks to safety and soundness due to an federal credit union’s excessive investment in fixed assets,” the proposal said.
NCUA Director of Examination and Insurance Larry Fazio said the agency currently has a very early draft of the guidance.
NCUA Chief Financial Officer Rendell Jones presented the corporate stabilization fund quarterly report. Jones said the fund’s positive net position does not mean credit unions can get rebates at this time.