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Board Briefed on Progress of Diversity and Inclusion in Credit Union System

ALEXANDRIA, Va. (Nov. 19, 2020) – Using a live audio webcast, the National Credit Union Administration Board held its tenth open meeting of 2020 and unanimously approved:

• A proposed rule to amend its regulations by removing the prohibition on the capitalization of interest in connection with loan workouts and modifications.
• The reprogramming of unspent money in the 2020 travel budget to fund NCUA’s activities related to the coronavirus pandemic and the agency’s Central Office renovation.

The Director of the Office of Minority and Women Inclusion briefed the NCUA Board on the state of credit union diversity and the 2019 Credit Union Diversity Self-Assessment results. The Chief Financial Officer also briefed the Board on the National Credit Union Share Insurance Fund’s performance during the third quarter of 2020.

Proposed Rule on Capitalization of Interest Provides Relief

The Board approved a proposed rule (opens new window) that removes the prohibition on the capitalization of interest in connection with loan workouts and modifications.

“At the onset of the COVID-19 pandemic roughly nine months ago, that priority shifted into high gear as I worked with agency staff on COVID-relief measures that would allow credit unions the flexibility to work with borrowers experiencing economic hardship as a result of the pandemic,” Chairman Rodney E. Hood said. “Today’s proposed rule continues to move toward those relief efforts.”

The Board determined that the current prohibition on authorizing additional advances to finance unpaid interest might be overly burdensome and, in some cases, hamper a federally insured credit union’s good-faith efforts to engage in loan workouts with borrowers facing difficulty because of the economic disruption that the COVID-19 event has caused. Advancing interest may avert the need for alternative actions that would be more harmful to borrowers.

The proposed rule would establish documentation requirements to help ensure that the addition of unpaid interest to the principal balance of a mortgage loan does not hinder the borrower’s ability to become current on the loan. The proposed change would apply to workouts of all types of member loans, including commercial and business loans.

Comments are due 60 days from publication in the Federal Register.

Board Briefed on Results of the 2019 Credit Union Diversity Self-Assessment

The Director of the Office of Minority and Women Inclusion briefed (opens new window) the NCUA Board on the Voluntary Credit Union Diversity Self-Assessment and the results for 2019 (opens new window); the NCUA’s initiatives to promote diversity, equity, and inclusion within the credit union system; and the progress that’s been made.

“Given the challenging times our nation is currently facing, there is a heightened interest and emphasis on diversity, equity, and inclusion,” Chairman Rodney E. Hood said. “Tremendous benefits in growth, talent, and innovation are possible when a credit union’s employees, managers, and board of directors reflect the diversity of the communities they serve.”

The NCUA has collected diversity data from credit unions through the Diversity Self-Assessment for four years. In 2019, 118 credit unions submitted self–assessments, compared to 81 self-assessments submitted in 2018. A majority (56 percent) of these credit unions reported a leadership and organizational commitment to diversity, and 48 percent reported taking steps to implement employment practices that demonstrate that commitment.

Approximately 200 unique credit unions submitted a self–assessment to the NCUA’s OMWI for at least one of the four years the assessment has been available. Credit unions that submitted the self-assessment more than once showed marked improvement in their diversity and inclusion levels from year-to-year.

The Credit Union Diversity Self-Assessment (opens new window) outlines best practices for creating a more diverse and inclusive credit union, and increasingly, it is being used by credit unions to assess and monitor their diversity-related efforts. The NCUA now accepts self-assessments year-round. The cut-off date for annual submissions is January 15 of the following year.

Share Insurance Fund Remains Strong

The National Credit Union Share Insurance Fund reported (opens new window) $19.2 billion in assets as of the third quarter of 2020. The fund also reported $46.6 million in net income year-to-date.

The Share Insurance Fund in October received additional capitalization deposits of approximately $1.5 billion from insured credit unions after the NCUA invoiced for its semi-annual contributed capital adjustment for credit unions with $50 million or more in assets.

Additionally, for the third quarter of 2020:

• The number of CAMEL codes 4 and 5 credit unions decreased 1.8 percent from the end of the second quarter, from 166 to 163. Assets for these credit unions decreased 5 percent for the same period from $10.3 billion to $9.7 billion.
• The number of CAMEL code 3 credit unions decreased 2.3 percent from the end of the second quarter, from 785 to 767. Assets for these credit unions decreased 8.9 percent for the same period from $44.6 billion to $40.6 billion.

There were no federally insured credit union failures in the third quarter that caused a loss to the Share Insurance Fund. Total year-to-date losses associated with one failure in 2020 is $1.6 million.

The third-quarter figures are preliminary and unaudited. Additional information on the performance of the Share Insurance Fund is available online.

Unspent Travel Budget Repurposed for COVID-19 Response, Renovations

The NCUA Board approved reprogramming $4.3 million from the agency’s projected unspent 2020 travel budget to fund pandemic response activities. This includes COVID-related renovations to the NCUA’s Central Office building, such as updating the building’s HVAC system.

The Office of the Chief Financial Officer updated its midsession projection for travel-related spending and now estimates at least $18 million will remain unspent due to the COVID-19 pandemic. The office previously projected $13 million of unspent travel for 2020.

Additional information on this reprogramming can be found on the agency’s website (opens new window).