Markets Wired

Chairman Hood Releases Select Accomplishments from April 2019 to January 2021

ALEXANDRIA, Va. (Jan. 19, 2021) – National Credit Union Administration Chairman Rodney E. Hood released today selected accomplishments since he was sworn in as the eleventh Chairman of the NCUA in April 2019.

Throughout Chairman Hood’s historic tenure as the first Black American to lead a banking regulatory agency, the NCUA provided significant regulatory relief, effectively responded to the COVID-19 crisis, steadfastly promoted diversity, equity and financial inclusion and provided vital support to small businesses and communities across the nation.

“Since I became Chairman nearly two years ago, the NCUA has been guided by the principle that regulation should be effective, not excessive, and that the agency should support financial inclusion,” Chairman Hood said. “With the support of the NCUA’s talented and dedicated staff, the agency stayed true to this principle and fostered an environment that allowed credit unions to stay competitive in an evolving marketplace.”

“As I continue my work on the NCUA Board, I remain steadfastly committed to serving the American people and the credit union system,” Chairman Hood said. “In 2021, I look forward to working with my fellow Board Members, the NCUA staff, and stakeholders in the credit union system to create a modern regulatory structure that fulfills our obligations to credit unions and their members, fosters innovation and financial inclusion, and protects the National Credit Union Share Insurance Fund.”

Providing Regulatory Relief

Under Chairman Hood’s leadership, the NCUA has vigorously pursued a regulatory agenda that is effective, but not excessive. These efforts have resulted in the modernization of the agency’s rules and regulations to ensure continued safety and soundness, while reducing regulatory burdens, and the expansion of access to safe and affordable financial products and services. The NCUA’s significant actions in support of this regulatory philosophy include:

• An October 24, 2019 final public unit and nonmember shares rule (opens new window) allowing federally insured credit unions to accept a greater amount of public unit and nonmember shares.
• A December 12, 2019 final risk-based capital rule (opens new window) delaying the implementation of the risk-based capital rule until January 1, 2022.
• A January 23, 2020 proposed bank transaction rule (opens new window) providing greater clarity on the regulations governing transactions whereby a federally insured credit union proposes to purchase assets and assume liabilities from another institution that is not a credit union.
• A January 23, 2020 proposed subordinated debt rule (opens new window) permitting low-income-designated credit unions, complex credit unions, and newly-chartered federal credit unions to issue subordinated debt.
• An April 16, 2020 final appraisal rule (opens new window) increasing the threshold that determines whether an appraisal is required for residential real estate related transactions.
• A July 30, 2020 final rule (opens new window) allowing greater access to safe and affordable financial services by changing the agency’s chartering and field-of-membership regulations for community charter approvals, expansions, or conversions.
• A July 30, 2020 proposed rule (opens new window) phasing in the day-one adverse effects on regulatory capital that may result from fully implementing the current expected credit losses (CECL) accounting methodology.
• A November 19, 2020 proposed rule removing the prohibition on the capitalization of interest in connection with loan workouts and modifications.
• A December 17, 2020 final rule (opens new window) amending the NCUA’s regulation governing assessment of an annual operating fee to federal credit unions.
• A December 17, 2020 proposed rule (opens new window) revising the definition of a service facility for multiple common-bond federal credit unions.
• A December 17, 2020 proposed rule (opens new window) permitting federal credit unions to purchase mortgage-servicing rights from other federal credit unions under certain conditions.
• A December 17, 2020 proposed rule (opens new window) amending one of the requirements that a federal credit union must adopt as a part of their written overdraft policy.
• A December 23, 2020 notice of proposed rulemaking (opens new window) amending the agency’s Suspicious Activity Report (SAR) regulation to provide exemptions from BSA filing requirements where appropriate.

Responding to the COVID-19 Pandemic

When the COVID-19 pandemic began in March of 2020, Chairman Hood focused on mitigating the pandemic’s impact on the credit union system, providing credit unions with the operational flexibility they need, and ensuring that credit union members have access to needed credit. The NCUA also adjusted its supervision and examination program to protect the safety of its staff and staffs of the credit unions it oversees, while addressing emerging risks and implementing statutory and regulatory changes that have occurred in response to COVID-19.

The NCUA’s actions in response to the pandemic include:

Supervisory Guidance

• Coronavirus (COVID-19): Information for Federally Insured Credit Unions and Members, a public website with COVID-19 resources, including frequently updated FAQs, for credit unions and members.
• March 16, 2020 Letter to Credit Unions (opens new window) regarding NCUA Actions Related to COVID-19, which encourages credit unions to work with affected borrowers throughout the pandemic.
• March 20, 2020 Letter to Federal Credit Unions regarding NCUA Actions Related to COVID-19-Annual Meeting Flexibility, which enables a federal credit union to adopt, by a two-thirds vote of its Board of Directors, a bylaw amendment to Article IV without undergoing further bylaw approval processes with the NCUA.
• March 26, 2020 Letter to Credit Unions regarding Responsible Small-Dollar Lending in Response to COVID-19, which reiterated the NCUA’s support of small-dollar lending.
• March 26, 2020 Letter to Credit Unions regarding Identification of Essential Critical Infrastructure Workers During COVID-19, which provided guidance for identifying essential critical infrastructure workers during the pandemic.
• April 7, 2020 Letter to Credit Unions regarding SBA Loan Programs to Help Small Businesses and Members During the COVID-19 Pandemic, which stated that the NCUA would not criticize credit unions’ good faith efforts to prudently use SBA programs with members affected by COVID-19.
• April 7, 2020 Letter to Credit Unions regarding a Summary of the Coronavirus Aid, Relief and Economic Security (CARES) Act, which outlined key provisions affecting credit unions due to the CARES Act and encourages credit unions without a current regular or agent CLF membership to join as soon as possible.
• April 16, 2020 Letter to Credit Unions regarding Enhancements to Central Liquidity Facility Membership and Borrowing Authority, which outlined significant liquidity support to the entire credit union system as it addresses the impact of the COVID-19 pandemic.
• April 17, 2020 Letter to Credit Unions regarding Temporary Regulatory Relief in Response to the COVID-19 Pandemic, which described temporary regulatory relief measures to help ensure that federally insured credit unions remain operational and liquid during the COVID-19 pandemic.
• April 22, 2020 Letter to Credit Unions regarding Residential Appraisals Threshold Increase and Other COVID-19-Related Relief Measures, which increases the threshold level where an appraisal is not required for residential real estate related transactions from $250,000 to $400,000.
• April 30, 2020 Letter to Credit Unions regarding Working with Borrowers Affected by the COVID-19 Pandemic, which described a variety of strategies credit unions can use to work with borrowers who experience financial hardship due to the COVID-19 pandemic.
• May 22, 2020 Letter to Credit Unions regarding Principles for Making Responsible Small-Dollar Loans, which reminded credit unions to underwrite small-dollar loans based on prudent policies, offer these products in a manner consistent with safe and sound practices, comply with consumer protection and other applicable laws and regulations, and treat members fairly.
• June 8, 2020 Letter to Credit Unions regarding Prompt Corrective Action Regulatory Relief Measures in Response to the COVID-19 Pandemic, which provided an overview of relief measures for federally insured credit unions during the pandemic, while still maintaining the safety and soundness of the credit union system.
• July 27, 2020 Regulatory Alert regarding the Treatment of Certain COVID-19-Related Loss Mitigation Options Under the Real Estate Settlement Procedures Act, which states that a loan mortgage servicer may offer a borrower a loss mitigation option based on its evaluation of limited information collected from a borrower, if certain criteria are met.
• August 6, 2020 Risk Alert on COVID-19 Fraud Schemes, informing credit unions about the risk of fraud associated with the COVID-19 pandemic.
• November 20, 2020 Letter to Federal Credit Unions that extended the relief measures outlined in Letter to Federal Credit Unions, 20-FCU-02, NCUA Actions Related to COVID-19 – Annual Meeting Flexibility.

The Central Liquidity Facility

Following the regulatory enhancements provided by the CARES Act and changes to the agency’s regulations, the Central Liquidity Facility (CLF) experienced a significant increase in its membership and borrowing capacity. In total, 4,145 credit unions, or 80 percent, of all federally insured credit unions, have access to the CLF, either as a regular member or through their corporate credit union. New memberships have added $989.8 million in additional subscribed capital stock to the facility. Under the temporary authority granted by the CARES Act, the CLF can borrow sixteen times its total capital. As of December 2020, the facility’s borrowing authority stood at $32.2 billion. The NCUA’s actions in support of the CLF include:

Offsite Examinations and Remote Agency Operations

The NCUA’s response to COVID-19 has been robust. On March 16, 2020, the agency mandated a strict offsite examination and supervision policy that continues to this day. Since then, NCUA examination staff has been working closely with credit unions to obtain documentation, complete examination procedures offsite, and thereby limit the burden on credit unions so they can focus on providing uninterrupted service to their members. The NCUA’s actions in support of offsite examinations and remote agency operations include:

• March 30, 2020 Letter to Credit Unions regarding Offsite Examination and Supervision Approach, which mandated a strict offsite policy for all employees and contracted support staff as of March 16, 2020.
• April 29, 2020 Letter to Credit Unions regarding Outreach Related to COVID-19 Impact, which informed credit unions that examiners would be reviewing questions with them between May 4 and May 18 to understand the challenges credit unions are facing during the COVID-19 pandemic.
• May 28, 2020 Letter to Credit Unions regarding an Update to Offsite Examination and Supervision Approach, which informed credit unions about changes to the NCUA’s examination and supervision approach, effective June 1, 2020.
• July 15, 2020 Letter to Credit Unions regarding Update to NCUA’s 2020 Supervisory Priorities, which provided new information on the NCUA’s 2020 supervisory priorities to reflect emerging economic conditions in response to the COVID-19 pandemic, as well as various statutory and regulatory changes that have occurred since March 2020.

Regulatory Relief

• An April 16, 2020 temporary final rule (opens new window) raising the maximum aggregate amount of loan participations that a federally insured credit union may purchase from a single originating lender without needing a waiver from an NCUA regional director.
• An April 22, 2020 interim final rule (opens new window) amending the NCUA’s capital adequacy and member business loans and commercial lending regulations following the creation of the SBA’s Paycheck Protection Program (PPP).
• A May 21, 2020 interim final rule (opens new window) making two temporary changes to the agency’s prompt corrective action regulations, providing relief to credit unions that temporarily fall below well capitalized.
• A May 21, 2020 proposed rule (opens new window) amending the NCUA’s regulation governing the requirements for a share account to be separately insured as a joint account, helping to alleviate delays and uncertainty for members in the event of a credit union’s failure.
• A September 17, 2020 final rule deferring the requirement to obtain an appraisal or written estimate of market value for up to 120 days following the closing of certain residential and commercial real estate transactions, excluding transactions for acquisition, development, and construction of real estate.
• An October 15, 2020 proposed rule (opens new window) amending the agency’s derivatives rule in Subpart B to Part 703 to allow more flexibility for federal credit unions to manage their interest rate risk through these financial instruments.
• A December 17, 2020 temporary final rule (opens new window) extending regulatory relief measures in response to COVID-19 to December 31, 2021.

Extension of COVID-19 Relief Measures

NCUA Board Members and members of Congress worked to make certain critical CARES Act provisions were extended to ensure the NCUA and federally insured credit unions could respond to the evolving nature of COVID-19, and provide needed regulatory certainty to the industry.

Signed into law on December 27, 2020, the Consolidated Appropriations Act, 2021 (opens new window) extended several COVID-19 relief measures, including:

• The CARES Act provisions that provided the CLF with increased flexibility and borrowing authority to support the liquidity needs of the system and the Share Insurance Fund through December 31, 2021.
• The regulatory relief measures related to troubled debt restructurings, which lengthened the exemption from complying with the Financial Accounting Standards Board’s current expected credit losses methodology until January 1, 2022.

The Consolidated Appropriations Act provided $12 billion in COVID-19 relief funding for community development financial institutions that predominantly serve minority communities. Approximately a third of this $12 billion is set aside for smaller financial institutions with less than $2 billion in assets. Additionally, the act provided the Community Development Financial Institutions Fund with $270 million in supplemental funding. The Community Development Revolving Loan Fund, which the NCUA administers, received $1.5 million in funding for technical assistance grants and low-interest loans to support low-income credit unions.

The act also provided additional support for, and extended the Paycheck Protection Program (PPP), through March 31, 2021. Approximately $284 billion was set aside for first and second- round forgivable PPP loans. Also, $15 billion was set aside for PPP lending through community-based financial institutions like CDFIs and minority depository institutions (MDIs), along with other changes to the PPP program.

Advancing Diversity, Equity, and Financial Inclusion

Chairman Hood has been proud to lead an agency where its core values embrace the tenets of diversity, equity, and financial inclusion. More specifically, he and the NCUA Board are committed to promoting a diverse workforce, an inclusive work environment, and a diverse supply chain, all of which makes good business sense. Additionally, Chairman Hood has encouraged financial services leaders to act on their support for diversity with a commitment to community building through financial inclusion.

Diversity, Equity, and Inclusion

The NCUA has seen increasing levels of diversity in its workforce. In 2020, minorities accounted for 30.5 percent of the agency’s workforce. In terms of the NCUA’s leadership pipeline, the agency has improved the racial diversity of its senior staff positions, from 13.2 percent in 2015 to 22.0 percent in 2020. Racial diversity in the agency’s manager-level staff (Grades 13 to 15) increased from 22.1 percent in 2015 to 27.5 percent in 2020.

Examiners comprise 67.6 percent of the agency’s workforce and, thus, comprise a significant portion of the leadership pipeline. To ensure greater diversity within the examiner ranks, the NCUA increased its efforts to recruit diverse talent, including increasing recruitment efforts at historically black colleges and universities, Hispanic-serving institutions, and other minority- serving institutions, as well as providing internships to high school students from underserved and economically challenged communities.

Additionally, the NCUA encouraged the credit union system and the broader financial services industry to embrace and champion the principles of DEI by:

• Convening the NCUA’s Diversity, Equity, and Inclusion Summit, which took place in Alexandria, Virginia, on November 6, 2019, when more than 150 credit union professionals gathered to promote the value of DEI for credit unions, share best practices, and develop solutions to industry-specific challenges.
• Promoting credit union participation in the NCUA’s annual voluntary Credit Union (opens new window) Diversity Self-Assessments (opens new window), which enable credit unions to more effectively monitor their diversity-related efforts.
• Leading the formation of the Credit Union DEI Collective, which serves as a resource to the industry on all things DEI-related.

Financial Inclusion

During the NCUA’s Senior Staff Position Forum, which took place from April 27 through May 2, 2020, its senior leadership collectively identified financial inclusion as one of the agency’s top priorities.

To that end, the NCUA launched in October 2020 its Advancing Communities through Credit, Education, Stability, and Support (ACCESS) initiative. Comprised of representatives from across the agency, this initiative refreshes and modernizes regulations, policies, and programs that support financial inclusion within the agency and, more broadly, throughout the credit union system. By dedicating resources from across its business units, the NCUA is working to ensure an inclusive and open-minded approach to making access to safe and affordable financial services more widely available.

It is fitting that the NCUA play a significant role in these efforts, as credit unions have a strong emphasis on service to their members and to the surrounding community. Those qualities are captured in the credit union’s “people helping people” ethos.

Advancing Communities through Credit

The NCUA recognizes that expanding access to credit gives more Americans the opportunity to build businesses, afford higher education, achieve the dream of homeownership, and create strong, vibrant communities. To that end, the NCUA expanded the availability of credit to stimulate economic growth and improve the financial well-being of all Americans in the following areas:

Advancing Communities through Education

Informed consumers who have a strong foundation in personal finance are essential to a healthy credit union system. A core credit union mission, therefore, is that of promoting financial literacy. The NCUA has worked to advance financial literacy and personal finance education efforts and — along with other governmental, private sector, and non-profit partners — has participated in national financial literacy initiatives. The agency’s efforts in this area include:

Advancing Communities through Stability

Often, MDIs and small and low-income credit unions are the only federally insured financial institutions in underserved and rural communities. Accordingly, they play a critical role in providing affordable financial services to millions of Americans. The NCUA worked to help these institutions thrive and meet the evolving needs of their members, and by extension, their communities. These efforts include:

• A July 18, 2019 final appraisal rule (opens new window) helping boost economic activity and job creation in underserved and rural areas, particularly in certain hard-pressed areas.
• Participating, on March 3, 2020, at the Freedman’s Bank Forum, where financial regulators and financial institutions discussed MDI-related issues.
• Convening, on March 4, 2020, the NCUA’s MDI Forum, a two-day forum for credit unions focusing on the NCUA’s 2020 supervisory priorities, strategies for growth, and the agency’s initiatives to support MDIs.
• Issuing a May 28, 2020 Letter to Credit Unions regarding Low-Income Designations: Qualification of Military Personnel, which improved NCUA’s low-income designation methodology and thereby ensured full financial inclusion for the men and women serving in our nation’s military.
• Issuing, on June 25, 2020, the NCUA’s Annual Report to Congress on Minority (opens new window) Depository Institutions (opens new window).
• Using a portion of the NCUA’s annual Community Development Revolving Loan Fund grants for the Minority Depository Institutions Mentoring Program, which fosters relationships between low-income-designated credit unions and small MDIs that help those credit unions serve their communities better.
• A December 17, 2020 final rule (opens new window) amending various parts of the NCUA’s regulations to permit low-income designated credit unions, complex credit unions, and new credit unions to issue subordinated debt for purposes of regulatory capital treatment.

Advancing Communities through Support

Chairman Hood recognizes that the NCUA’s primary responsibility is to ensure the continued safety and soundness of the nation’s credit union system. He also recognizes the impact employment has in advancing communities. Where appropriate, the Chairman has encouraged the credit union system and the broader financial services industry to support new employment opportunities for minorities, women, the disabled, and the underserved because doing so allows these individuals to join the financial mainstream and benefit from greater economic opportunity. These efforts include:

• Approving, on November 21, 2019 with the NCUA Board, the Second Chance Initiative (opens new window), which allows individuals convicted of certain minor offenses to work in the credit union industry without applying for the Board’s approval.

Improving the NCUA’s Culture

The NCUA values having a respectful and professional workplace. To improve the agency’s culture and ensure that the NCUA retains a respectful and professional work environment, the NCUA has taken these actions:

• Creating the new Office of Ethics Counsel, which includes a Chief Ethics Counsel, who serves as the agency’s most senior ethics official.
• Supporting the formation of new staff-led Employee Resource Groups (ERGs), which promote collaboration and communication amongst staff throughout the agency.
• Supporting the development of an ERG Ambassador Program to identify member volunteers to support agency-wide recruitment efforts.
• Instituting mandatory, live, and on-demand inclusion and anti-harassment training for all managers that supplement existing training.

Supporting Small Businesses

Recognizing the credit union mission is grounded in the concept of providing affordable financial products and services tailored to meet the specific needs of their members, the NCUA supported policies, programs, and initiatives that help entrepreneurs start or expand businesses. In addition, because the COVID-19 pandemic has had a particularly severe impact on the nation’s small businesses, especially those in vulnerable and marginalized communities, the NCUA focused on ways that the agency can best assist credit unions in their efforts to help main street entrepreneurs and their small businesses survive. These efforts include:

• April 30, 2019 NCUA-SBA Memorandum of Understanding, which is geared towards bringing small business and credit unions together by launching a series of initiatives, including webinars, training events, and media outreach, that will increase credit unions’ understanding and usage of SBA-backed loans and resources.
• August 2019 Regulatory Alert regarding Servicing Hemp Business, which provides much- needed clarity to farmers and other rural Americans as they seek to invest in this new product.
• April 28, 2020 Letter to Credit Unions regarding the Regulatory Treatment for Paycheck Protection Program Loans, which described an interim final rule amending regulatory requirements related to the SBA PPP loans and the Board of Governors of the Federal Reserve System’s PPP Lending Facility advances.
• June 9, 2020 NCUA-EXIM Memorandum of Understanding, a first-of-its-kind agreement whereby the NCUA and the Export-Import Bank of the United States develop educational and training initiatives on export financing opportunities, which are then shared with credit unions so they can gain access to capital.
• June 16, 2020 Letter to Credit Unions with Additional Guidance Regarding Servicing Hemp-Related Businesses, which provides additional information for credit unions that are serving, or considering serving, legal hemp-related businesses.