Markets Wired

ALEXANDRIA, Va. (June 21, 2018) – The National Credit Union Administration Board held its sixth open meeting of 2018 at the agency’s headquarters today and unanimously approved two items:

• A final rule amending the agency’s regulations governing its chartering and field-of-membership rules with respect to applicants for a community charter approval, expansion, or conversion.
• A final rule to provide members of federally insured credit unions with greater transparency when those credit unions seek voluntary mergers.

The Office of General Counsel briefed the Board on a final rule approved by notation vote on May 30, 2018 that made conforming amendments to the NCUA’s member business loan regulations.

The agency’s Deputy Executive Director, Chief Information Officer, and Business Innovation Director briefed the Board on the progress of the agency’s Enterprise Solution Modernization program.

Board Approves Field-of-Membership Rule Changes

Changes to the NCUA’s field-of-membership regulations will provide more flexibility for credit unions, more consumer choices, and an opportunity for public comment in some instances under a final rule (Part 701) approved by the Board.

Changes to the existing regulation include:

• An applicant for an original community charter, conversion, or expansion has the option of submitting a narrative, with sufficient supporting documentation, to establish the existence of the required well-defined local community;
• The agency will hold a public hearing on narrative applications where the proposed community’s population exceeds 2.5 million; and,
• For communities that are subdivided into metropolitan divisions, the Board will permit an applicant to designate a portion of the area as its community, regardless of division boundaries.

The final rule, which does not raise the population limit for a presumptive community, is consistent with a March 29, 2018, U.S. District Court decision upholding two provisions and vacating two provisions of the agency’s 2016 final field-of-membership rule (opens new window) regarding community charters.

The final rule, available online here (opens new window), will become effective Sept. 1, 2018.

Final Rule Provides Greater Transparency in Voluntary Mergers

Members of a federally insured credit union seeking a voluntary merger will be better-informed about that merger and have more time to consider their votes under a final rule (Parts 701, 708a, and 708b) approved by the Board.

The final rule will apply to all federally insured credit unions and will:

• Increase the minimum required time for notice to members before a merger vote to 45 days;
• Require the merging credit unions to disclose merger-related compensation increases above $10,000 or 15 percent of compensation, whichever is greater, for certain employees and officials of the merging credit union;
• Clarify the contents and format of the members’ notice to provide better information; and,
• Provide a method to communicate to the NCUA regarding the proposed merger.

The final rule, available online here (opens new window), will become effective Oct. 1, 2018.

Member Business Loan Definition Changes

Federally insured credit unions may exclude loans made on 1-to-4-unit family dwellings from the aggregate member business loan cap.

The Board unanimously approved, by notation vote on May 30, 2018, a change to the member business lending rule (Part 723) that conforms with changes to the Federal Credit Union Act made by the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018, signed into law by President Donald J. Trump on May 24.

That legislation revised the definition of a member business loan to exclude all loans secured by liens on 1-to-4-unit family dwellings, regardless of the occupancy status of the borrower. The Federal Credit Union Act and the NCUA’s member business lending rule previously defined member business loans, for the purpose of the aggregate limit on those loans, to include loans secured by liens on 1-to-4-unit family dwellings that were not the borrower’s principal residence.

The final rule, available online here (opens new window), became effective June 5, 2018, upon publication in the Federal Register.

Enterprise Solution Modernization Program Update

The NCUA’s Enterprise Solution Modernization Program has taken additional work outside its original scope and is moving ahead with several initiatives to streamline the agency’s processes, technology, and infrastructure.

The agency awarded a contract to Deloitte, a consulting firm, to provide system development and technical support products and services for the Examination and Supervision Solution project. The project is aimed at modernizing technology and procedures to improve the examination process and ease burdens on credit unions and on agency staff by reducing the amount of examination and supervision time spent in credit unions.

Launched in 2016, the Enterprise Solution Modernization program is the most complex program the NCUA has undertaken. The four areas the program is currently focused on are:

• The Examination and Supervision Solution will replace the present examination system, provide a central user interface and secure transfer capabilities, and build infrastructure for all the ESM initiatives.
• The Credit and Deposit Analytics Solution project, originally designed to replace and improve analytic tools for loan and share data, will await an agency decision on a standardized and expanded data set.
• Loan and Share Data Modernization will standardize and modernize the member loan and share download for examination. The NCUA received public comments on possible expansion and standardization of loan, deposit, and investment information collected during examinations. These comments will guide the agency’s efforts in this area, with a primary focus on data security.
• The Data Strategy and Framework Initiative will improve data governance, enterprise analytic strategy, and staff education.

A summary of the Enterprise Solution Modernization program update staff presented to the Board is available online here (opens new window).