NCUA extends PCA earnings-retention relief through March 2023

Prompt corrective action (PCA) changes affecting earnings retention and the filing of net worth restoration plans remain in place through March 31, 2023, the National Credit Union Administration (NCUA) announced Friday in an NCUA Express message to subscribers.

The agency noted the provisions are being extended under an interim final rule adopted in February. Included in that action is authority for the agency board to issue an order, applicable to all federally insured credit unions (FICUs), to waive the earnings retention requirement for any FICU that is classified as adequately capitalized.

The changes announced Friday, effective from April 1, 2022, through March 31, 2023, extend relief provisions that have been in operation since 2020 to help credit unions remain operational and liquid amid the COVID-19 pandemic:

  • Earnings retention: The temporary order states that any consumer (non-corporate) FICU whose net worth classification, as defined in part 702 of the NCUA’s regulations, is adequately capitalized between March 31, 2022, and March 31, 2023, may decrease its earnings-retention requirement as set forth in part 702 to zero. In Friday’s announcement, the agency also said that if a credit union either poses an undue risk to the National Credit Union Share Insurance Fund (NCUSIF) or exhibits material safety and soundness concerns, the appropriate NCUA Regional Director may require the credit union to submit an earnings transfer waiver request.
  • Net worth restoration plans: An undercapitalized credit union is permitted to submit a streamlined net worth restoration plan if it becomes undercapitalized predominantly because of share growth. If a credit union becomes less than adequately capitalized for reasons other than share growth, it must still submit a net worth restoration plan under the current requirements in NCUA’s regulations, the agency said.

The temporary order on earnings retention, approved by notation vote of the NCUA Board, notes that share (deposit) growth in credit unions remains “unusually high compared to pre-pandemic levels.” In Friday’s announcement, the agency said decreasing the earnings retention requirement “is necessary avoid a significant redemption of shares and would further the purposes of the prompt corrective action regulations.”

Temporary order

Reg lookup: Temporary Regulatory Relief in Response to COVID-19 – Prompt Corrective Action