Credit union regulator extends enhanced CLF provisions under COVID relief law; asset-growth trigger for supervision paused until 2023

Provisions implementing a recent statutory extension of enhanced liquidity facility access and those delaying the effects of asset growth on a credit union’s regulatory and supervisory framework to 2023 – both aimed at helping credit unions better weather the impacts of the coronavirus pandemic – were approved in two interim final rules adopted Thursday by the National Credit Union Administration (NCUA) Board.

Regarding asset growth, the NCUA Board on Thursday issued an interim rule that permits federally insured credit unions (FICU) to use asset data as of March 31, 2020, to determine whether they are subject to capital planning and stress testing requirements under the NCUA’s regulations and supervision from the Office of National Examinations and Supervision (ONES). This relief applies for the calendar years 2021 and 2022. “Under the interim final rule, asset growth in 2020 would not trigger new regulatory requirements under part 702 until January 1, 2023, at the earliest,” the rule summary states.

This action is similar to that taken by banking regulators in response to pressures on supervised institutions by the pandemic. The NCUA said that because of the pandemic – due to a slowing in consumer spending, rapid deposit growth (fueled in good part by stimulus payments), and other factors – many FICUs have been, or may soon be, pushed over the asset thresholds that could subject them to additional regulatory requirements or ONES supervision. “Complying with these new or more stringent regulatory standards would impose additional transition and compliance costs on such FICUs that otherwise may not have become subject to these requirements at this time,” the agency said in its interim rule. “This interim final rule gives affected FICUs more time to either reduce their balance sheets, or to prepare for higher regulatory standards.”

Regarding liquidity access, another interim final rule approved Thursday extends provisions enacted under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that expanded Central Liquidity Facility (CLF) access beyond natural person credit unions to include access for corporate credit unions or a group of corporates. That expansion, implemented under an interim rule last April, was due to expire Dec. 31, 2020, but it was extended through Dec. 31, 2021, under the Consolidated Appropriations Act, 2021. Also extended are provisions approved in April governing CLF capital stock subscriptions by agent members.

The CLF interim final rule also extends and clarifies the regulatory provisions related to a member withdrawing from CLF membership: The immediate withdrawal period for credit unions that joined the CLF between April 29, 2020, and Dec. 31, 2020, now continues through Dec. 31, 2021; for those joining between Jan. 1 and Dec. 31, 2021, the immediate withdrawal period continues through Dec. 31, 2022. (Immediate withdrawal is permitted only upon the credit union’s providing written notice to the NCUA Board of its intent to exercise it.) On Jan. 1, 2023, all CLF members will be subject to the termination provisions in effect before April 29, 2020, the interim rule states.

Both interim final rules, approved by the NCUA Board on votes of 3-0, are set to take effect upon publication in the Federal Register with 60-day comment periods attached.

Asset-size thresholds, interim final rule

CLF, interim final rule