Regulator watching smaller credit unions for impact of pandemic, says closures ‘a possibility’

Watching closely to determine what additional support may be needed for smaller credit unions and minority depository institutions in the months to come as they face the continuing coronavirus crisis will be a priority for their federal regulator, a member of the agency’s board said Wednesday.

In recorded remarks to the Credit Union National Association (CUNA) Governmental Affairs Conference, National Credit Union Administration (NCUA) Board Member (and former Chairman) Rodney Hood said many financial institutions were left more vulnerable than they would otherwise have been due to the financial impact of the pandemic. “So closures of financial institutions, with the attendant systemic risks, are always a possibility,” he said.

Hood said that should closures occur, regulators need to be “prepared to respond appropriately to ensure the safety and soundness of the larger system,” and he said it would always be his preference to save institutions rather than merge them.

In other comments, Hood said his priorities for the agency are:

  • Moving forward with a new rule to expand lending authorities for credit union service organizations (CUSOs), which is now out for comment. “This rule also would allow credit unions to invest in non-credit union owned fintech companies, something that I think it critical in today’s marketplace,” he said.
  • “Significantly” streamlining and simplifying the process of chartering new credit unions. “The NCUA had one new charter last year,” Hood said. “Only two are planned for this year. These data are, quite frankly, unacceptable.” He asserted that the agency “can make it incredibly difficult to get a new charter. We aren’t saying chartering a credit union should be easy, but it shouldn’t feel impossible for many organizing groups.” Hood urged credit union groups to “lay the groundwork for more credit union start-ups because a system with almost no new start-ups is not sustainable.”

NCUA Board Member Rodney E. Hood Remarks before CUNA’s 2021 Governmental Affairs Conference