Senate Banking chief sent wish list for legislation to deal with crisis from credit union regulator

Four areas of statutory changes that the federal credit union regulator said would assist its efforts “in light of COVID-19” were outlined in a letter from the agency’s chairman to the chairman of the Senate Banking Committee Wednesday.

National Credit Union Administration (NCUA) Board Chairman Rodney Hood told Sen. Mike Crapo (R-Idaho) that changes in the law were needed to: improve liquidity for credit unions; provide regulatory relief in the agency’s prompt correction action (PCA) framework; reconfigure lending standards; and tweak credit union membership requirements.

In improving liquidity, Hood recommended making permanent the temporary changes for the agency’s Central Liquidity Facility (CLF) contained in the Coronavirus Aid, Relief and Economic Security Act (CARES Act), and giving the NCUA authority to waive the limit on federal credit unions’ (FCUs) lending to other credit unions.

Hood recommended three temporary changes to the current PCA framework: reduction in minimum capital standards for federally insured credit unions (from 7% to 6% for well capitalized, and from 6% to 5% for adequately capitalized); waiver of net-worth restoration plan requirements for up to 180 days for credit unions that are less than adequately capitalized; and increase from $5 million to $100 million for the asset threshold below which the NCUA Board can delegate decisions related to critically undercapitalized credit unions.

For lending standards, Hood advised an additional three changes: temporarily raise the member business lending cap to 20% (from its current 12.25%) of total assets; permanently increase the FCU loan maturity limit to 30 years (from 15 years); and permanently expand credit union outreach to underserved areas by authorizing all credit union charters to apply for servings areas designated as underserved (rather than only multiple common bond FCUs).

On credit union membership, Hood suggested that the Banking Committee chairman consider legislation that would remove the “reasonable proximity” requirement (or significantly amend it) in order to “permit greater flexibility for members to join a credit union.”

Separate from those recommendations, Hood also voiced his support for – following the pandemic crisis – Congress providing the agency “vendor authority” to allow the agency to better supervise for third-party cybersecurity risks.

(In a speech last week to the Mountain West Credit Union Association – delivered remotely from his home – NCUA Board Member Todd Harper said Congress should, among other things, “reauthorize” the agency’s third-party vendor supervision.)

RR: Harper lists 5 things Congress should do to help credit unions weather the pandemic (April 27, 2020)

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