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Board Action Bulletin

Approves Final Annual Operating Fee Assessment Rule

ALEXANDRIA, Va. (Dec. 18, 2020) – Through a live audio webcast, the National Credit Union Administration Board today held the second of two consecutive open meetings in December. At the meeting, the Board approved three items:

• Operating, capital, and National Credit Union Share Insurance Fund budgets for 2021 and 2022;
• A final rule on the annual operating fee assessment; and
• A final notice on the overhead transfer rate and the operating fee schedule methodologies.

Agency Budgets Approved for 2021, 2022

By a 2-1 vote, the NCUA Board approved the agency’s budgets for 2021 and 2022 (opens new window). Combined, the 2021 operating, capital, and National Credit Union Share Insurance Fund administrative budgets will be $341.4 million. The combined budgets for 2022 will be $343.5 million.

Budget	2021	2022
Operating budget	$314.6 million	$316.9 million
Capital budget	$18.8 million	$18.9 million
Share Insurance Fund budget	$8.0 million	$7.7 million

The budget supports a total of 1,192 full-time employees for 2021, and 1,187 full-time employees in 2022.

Annual Operating Fee Assessment Final Rule Approved

The Board unanimously approved a final rule (opens new window) that amends the NCUA’s regulation governing assessment of an annual operating fee to federal credit unions.

The final rule:

• Amends the current rule to exclude from total assets any loan a federal credit union reports under the Small Business Administration’s Paycheck Protection Program (PPP) or similar future programs approved for exclusion by the NCUA Board;
• Deletes from the current regulation references to the Credit Union System Investment Program and the Credit Union Homeowners Affordability Relief Program, both of which no longer exist;
• Amends the period used for the calculation of a federal credit union’s total assets; and
• Incorporates minor technical changes.

This final rule is effective 30 days after date of publication in the Federal Register.

Board Approves Issuing Final Notice on OTR and Operating Fee Schedule Methodologies

Staff from the NCUA’s Offices of Examination and Insurance and Chief Financial Officer briefed the Board on a final notice (opens new window) on the overhead transfer rate and the operating fee schedule methodologies.

Specifically, the offices sought approval to issue a final notice on these two matters:

• The existing principles-based overhead transfer rate methodology adopted in 2017; and
• Clarifications and changes to the agency’s methodology in determining how it apportions operating fees charged to federal credit unions.

The Board unanimously approved issuing the final notice.

The NCUA tweets all open Board meetings live. Follow @TheNCUA (opens new window) on Twitter, and access Board Action Memorandums and NCUA rule changes at www.ncua.gov. The NCUA also live streams, archives and posts videos of open Board meetings online.

Board Action Bulletin

Proposes Rules on Shared Facility Requirements, Mortgage Servicing Rights, Overdraft Policy

ALEXANDRIA, Va. (Dec. 17, 2020) – Through a live audio webcast, the National Credit Union Administration Board today held the first of two consecutive open meetings in December. At today’s meeting, the Board approved these five items:

• A proposed rule revising the definition of a service facility for multiple common bond federal credit unions;
• A temporary final rule that extends regulatory relief measures in response to COVID-19.
• A proposed rule that permits federal credit unions to purchase mortgage-servicing rights from other federal credit unions under certain conditions;
• A proposed rule on overdraft policy; and
• A final rule on subordinated debt.

The Board also received a staff briefing on the National Credit Union Share Insurance Fund’s 2021 normal operating level.

Field of Membership Shared Facility Requirements Proposed

The definition of a service facility for multiple common-bond federal credit unions outlined in the NCUA’s Chartering and Field of Membership Manual would be revised by a proposed rule (opens new window) (Part 701, Appendix B) approved 2-1 by the Board.

“Today’s action is good public policy and will allow individuals greater access to affordable products and services—especially in underserved and low-income areas,” Chairman Hood said during consideration of the rule. “Removing barriers so that federal credit unions can serve additional members has been a key part of my focus on financial inclusion. And these are changes that really should have happened a long time ago.”

The Board is proposing to include any shared branch, shared ATM, or shared electronic facility in the definition of “service facility” for a multiple common-bond federal credit union that participates in a shared branching network. The federal credit union does not need to be an owner of the shared branch network for the shared branch or shared ATM to be a service facility. These changes would apply to the definition of a service facility for additions of select groups to the fields of membership of multiple common-bond federal credit unions and for expansions into underserved areas.

The Board is also seeking comments about whether it should further amend the definition of “service facility” to include a federal credit union’s interactive website or mobile banking application.

Comments on the proposed rule must be received within 30 days of publication in the Federal Register.

Regulatory Relief in Response to COVID-19 Extended

The Board unanimously approved an extension of the effective date of its temporary final rule, which modified certain regulatory requirements to help ensure that federally insured credit unions remain operational and can properly conduct appropriate liquidity management to address economic conditions caused by the COVID-19 pandemic.

Specifically, the temporary final rule (opens new window) issued by the Board in April 2020:

• Raised the maximum aggregate amount of loan participations that a federally insured credit union may purchase from a single originating lender to the greater of $5,000,000 or 200 percent of the credit union’s net worth;
• Suspended limitations on the eligible obligations that a federal credit union may purchase and hold; and
• Suspended the required timeframes for the occupancy or disposition of properties not being used for federal credit union business or that have been abandoned.

Each of these temporary modifications would have expired on December 31, 2020. Due to the continued effects of COVID-19 on credit unions and their members, the Board decided to extend these measures until December 31, 2021.

Proposed Rule to Permit Purchase of Mortgage Servicing Rights

The Board approved 2-1 a proposed rule (opens new window) to amend its investment regulation to permit federal credit unions to purchase mortgage servicing rights from other federally insured credit unions under certain conditions.

“The time has come for the NCUA to permit federal credit unions to purchase mortgage servicing rights from other federally insured credit unions,” Hood said. “The ability to do this will provide flexibility for federal credit unions to manage their mortgage servicing lines of business, and create liquidity in the credit union system while providing a more diverse business and investment opportunity for purchasers of mortgage servicing rights.”

Under the proposed rule, eligible federal credit unions may purchase the mortgage servicing rights of loans that the federal credit union is otherwise empowered to grant, provided these investments are consistent with safety and soundness and made in accordance with the federal credit union’s policies and procedures that address the risk of these investments and servicing practices.

Comments on the proposed rule must be received within 30 days of publication in the Federal Register.

Proposed Overdraft Rule to Provide Flexibility

The Board approved 2-1 a proposed rule (opens new window) that would require federal credit unions to modify the requirement that a federal credit union’s written overdraft policy.

Said Chairman Hood, “If a participating member’s account is overdrawn, the credit union will, for a fee, cover the transaction. In some cases, overdraft protection can serve as a form of short-term credit, offering credit union members greater peace of mind and flexibility in managing their finances. During times of economic stress, in particular, access to short-term credit can be especially helpful. For a working parent on a reduced income, or a small business owner trying to keep her head above water until economic recovery begins, a quick source of affordable credit could help bridge the gap.”

Specifically, the proposed rule would modify the requirement that a federal credit union’s written overdraft policy establish a time limit, not to exceed 45 calendar days, for a member to either deposit funds or obtain an approved loan from the federal credit unions to cover each overdraft.

The proposed rule would remove the 45-day limit and replace it with a requirement that the written policy must establish a specific time limit that is both reasonable and applicable to all members, for a member either to deposit funds or obtain an approved loan from the federal credit unions to cover each overdraft.

Comments on the proposed rule must be received within 30 days of publication in the Federal Register.

Final Rule on Subordinated Debt Approved

The Board unanimously approved a final rule (opens new window) that amends 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.

“Federal credit unions borrowing in the form of subordinated debt is squarely within the statutory authority provided under law,” Hood said. “I support giving complex credit unions the authority to prudently use subordinated debt as an additional tool to comply with risk-based capital requirements, and newly chartered credit unions the ability to use this tool to get up and running. I am pleased with the balance we’ve struck with this final rule.”

The Board is finalizing the rule largely as proposed in January 2020, except for a few changes to various sections based on the comments received.

These changes include:

• Amending the definition of accredited investor;
• Providing a longer timeframe in which a credit union may issue subordinated debt after approval;
• Reducing the required number of years of pro forma financial statements an issuing credit union must provide with its application;
• Clarifying the prohibition on subordinated debt issuances outside of the United States; and
• Clarifying that the NCUA Board will publish a fee schedule only if it makes a determination to charge a fee.

This rule is effective January 1, 2022.

Normal Operating Level to Remain at 1.38 Percent

Staff from the NCUA’s Offices of Examination and Insurance and Chief Economist briefed the Board on the National Credit Union Share Insurance Fund’s normal operating level (opens new window) for 2021 and recommended the level remain unchanged at 1.38 percent.

The recommendation was based on a calculation of the normal operating level using 2020 data and the Board-approved methodology. In determining the recommendation, the following issues were considered:

• Potential impact of a moderate recession on the Share Insurance Fund;
• Potential decline of value in claims on corporate estates; and
• Projected decline in the equity ratio.

The agency reviews the normal operating level annually.

The NCUA tweets all open Board meetings live. Follow @TheNCUA (opens new window) on Twitter, and access Board Action Memorandums and NCUA rule changes at www.ncua.gov. The NCUA also live streams, archives and posts videos of open Board meetings online.

ALEXANDRIA, Va. (Dec. 16, 2020) – Federally insured credit unions experienced double-digit asset and share-and-deposit growth over the year ending in the third quarter of 2020, according to the latest NCUA Quarterly U.S. Map Review (opens new window).

Nationally, median asset growth over the year ending in the third quarter of 2020 was 12.0 percent as compared to 1.9 percent in the third quarter of 2019. Median growth in shares and deposits over the year ending in the third quarter of 2020 was 13.4 percent as compared to 1.5 percent during the year ending in the third quarter of 2019.

Among the other highlights in the report, and compared to third quarter 2019, membership was down slightly at the median, loans outstanding declined 0.6 percent at the median, the median total delinquency rate was 47 basis points as compared to 61 basis points, the loan-to-share ratio was 62 percent as compared to 71 percent, the median annualized return on average assets was 42 basis points as compared to 65 basis points, and 82 percent of federally insured credit unions had positive net income as compared to 89 percent.

The NCUA’s Quarterly U.S. Map Review tracks performance indicators for federally insured credit unions in all 50 states and the District of Columbia and includes information on the unemployment rate and home prices for U.S. states and territories.

ALEXANDRIA, Va. (Dec. 14, 2020) – The Honorable Kyle S. Hauptman became the 24^th Board Member of the National Credit Union Administration following a swearing-in ceremony held today at the agency’s Alexandria, Virginia, headquarters.

NCUA Chairman Rodney E. Hood delivered the oath of office to Hauptman.

“I am proud to have been nominated by President Trump and confirmed by the U.S. Senate,” said Board Member Hauptman following his swearing-in. “It is an honor to serve on the Board of the National Credit Union Administration.”

Hauptman stated that he has three priorities as a Board member: managing the fallout from the current pandemic and economic downturn, expanding the role of technology, and aligning incentives.

“Credit unions were chartered to serve those of modest means. I plan to work with credit unions, my fellow Board Members, and Congress on solutions for those facing financial stress,” said Hauptman. “I want to expand technology’s role in reaching the underserved because innovation can provide more inclusive financial services. And, I have always believed that you get what you incentivize. The practice of less-frequent exam cycles for credit unions with the highest marks, for example, will incent them to maintain that benefit and allow the NCUA to focus more of its attention on problematic credit unions.”

President Donald J. Trump announced the nomination of Hauptman on June 15. The U.S. Senate Banking, Housing, and Urban Affairs Committee held its confirmation hearing on July 21, and the Senate approved his nomination on Dec. 2. Hauptman’s tenure will run through Aug. 2, 2025.

Prior to serving on the NCUA Board, Hauptman was Senator Tom Cotton’s (R-Arkansas) advisor on economic policy, as well as Staff Director of the Senate Banking Committee’s Subcommittee on Economic Policy. Before joining Senator Cotton’s office, Hauptman served on President Donald J. Trump’s transition team in 2016.

Previously, he held the position of Executive Director of the Main Street Growth Project and Senior Vice President at Jefferies & Co. He also worked at Lehman Brothers as a bond trader in New York City and in their international offices in Tokyo and Sydney. Hauptman served as a voting member on the U.S. Securities and Exchange Commission Advisory Committee on Small and Emerging Companies from 2016–2017.

Board Member Hauptman holds a master’s in business administration from Columbia Business School and a bachelor of arts from University of California, Los Angeles.

ALEXANDRIA, Va. (Dec. 10, 2020) – To ensure a transparent and open discussion of several policy issues affecting federally insured credit unions, the National Credit Union Administration Board’s December meeting will occur over a two-day period. 

The NCUA Board will meet on Thursday, Dec. 17 and on Friday, Dec. 18. Each open meeting begins at 10 a.m. Eastern and will be livestreamed on NCUA.gov. Agendas for both days are now available the agency’s public website. Copies of Board Action Memorandums and other documents related to the items considered will available online at the start of each meeting. 

For additional information about NCUA Board meetings, please visit the NCUA’s public website.

ALEXANDRIA, Va. (Dec. 10, 2020) – The National Credit Union Administration expanded educational opportunities on its Learning Management Service (opens new window) in 2020, giving credit unions more resources to help them grow and better serve their members.

“I encourage all credit union leadership and staff to look into the opportunities our Learning Management Service provides,” NCUA Chairman Rodney E. Hood said. “LMS resources cover important subjects from basic training to advice on expanding services, all geared towards helping credit unions improve their efforts to provide affordable financial services.”

In 2020, the NCUA added courses in five areas:

• Basics of lending,
• Understanding share insurance,
• Capital considerations for new credit unions,
• Understanding financial statements, and
• Serving the underserved.

Courses planned for 2021 include “What Every Board Member Needs to Know” and Bank Secrecy Act compliance.

The LMS also has webinars discussing a variety of topics from governance to best practices to regulatory compliance. In 2020, NCUA added webinars covering:

• Financial inclusion,
• Payday alternative and small-dollar lending,
• Establishing partnerships with NeighborWorks,
• Export financing for small businesses, and
• Bank Secrecy Act and anti-money laundering regulations.

NCUA staff can provide answers to any questions about registering with or using LMS services by contacting [email protected].

The NCUA launched the LMS in 2017, and the Office of Credit Union Resources and Expansion manages the site, which operates at no charge to its users. More than 1,900 credit union management and staff members have taken advantage of LMS courses and webinars, which are open only to credit union employees and volunteers and which require each user to create an individual account.

Providing training and other technical assistance to credit unions helps these institutions thrive and meet the evolving financial needs of their members and by extension, their communities. This is one of the pillars of the NCUA’s financial inclusion initiative, ACCESS: Advancing Communities through Credit, Education, Stability, and Support. To learn more about the ACCESS initiative, visit www.ncua.gov/access.

ALEXANDRIA, Va. (Dec. 8, 2020) – The National Credit Union Administration Board today released its monthly meeting schedule for 2021. Open Board meetings are scheduled to begin at 10 a.m. Eastern on the following dates:

• January 14
• February 18
• March 18
• April 22
• May 20
• June 24
• July 22
• September 23
• October 21
• November 18
• December 16

No meeting is scheduled for August and the meeting schedule is subject to change.

The Board meeting calendar is posted to the NCUA’s public website along with the agendas, which are available one week in advance of each open Board meeting. Copies of Board memorandums and other documents related to the items considered are available online at the start of each meeting.

For the foreseeable future, the open Board meetings will only be livestreamed through the NCUA.gov website, and live updates are posted to Twitter @TheNCUA (opens new window).

ALEXANDRIA, Va. (Dec. 9, 2020) – The National Credit Union Administration is announcing several enhancements to the Fraud Hotline, which allows the public to report insider fraud concerns associated with credit union employees, directors, or volunteers to the NCUA.

With these improvements, fraud tips can now be submitted electronically through the NCUA’s website. Individuals can remain anonymous or provide contact information for appropriate agency staff to discuss their fraud concerns. The new form also allows for a description of the fraud and other critical information to assist in the evaluation of the reported concerns.

The NCUA encourages anyone that suspects or is aware of insider fraud at a federally insured credit union to report the information as soon as possible. Swift reporting minimizes risks, exposures, and losses, while supporting appropriate supervisory or administrative action against those that commit fraud or misuse their position.

ALEXANDRIA, Va. (Dec. 7, 2020) – The National Credit Union Administration today announced the selection of Elizabeth J. Fischmann as the agency’s first Chief Ethics Counsel, effective December 21.

In this new role, Fischmann will oversee the Office of Ethics Counsel that will certify the agency’s compliance with relevant federal ethics laws and regulations, promote accountability and ethical conduct, and help ensure the success of the NCUA’s ethics programs, including programs designed to prevent harassment, and misconduct in the workplace. She will report directly to the NCUA Board and will be supervised by the NCUA Chairman.

“Elizabeth Fischmann is a strong leader with an impressive legal background and record of accomplishment in managing ethics programs in the federal government,” said NCUA Chairman Rodney E. Hood. “I look forward to working with her to uphold the strong ethical culture within NCUA.”

Ms. Fischmann currently serves as the Associate General Counsel, Ethics, and Designated Agency Ethics Official for the U.S. Department of Health and Human Services, leading a staff of 37 employees, administering the HHS-wide ethics program, and supervising the implementation of the HHS ethics program. Her professional experience includes serving as an Associate Counsel at the U.S. Office of Government Ethics and Deputy Counsel for the U.S. Department of the Navy.

Ms. Fischmann attained a Juris Doctorate from Georgetown University Law Center and a Bachelor of Arts from the University of Virginia. She is a member of the District of Columbia Bar and Maryland Bar.

ALEXANDRIA, Va. (Dec. 3, 2020) – National Credit Union Administration Chairman Rodney E. Hood issued the following statement today in recognition of International Day of Persons with Disabilities.

“Today, the NCUA is proud to recognize this year’s International Day of Persons with Disabilities, an occasion to reflect on challenges faced by people with disabilities during periods of crisis. This year’s theme, ‘Building Back Better: Toward a Disability-Inclusive, Accessible and Sustainable Post COVID-19 World’ emphasizes a commitment towards strengthening collective efforts for universal access to essential services. That commitment is particularly critical when it comes to financial inclusion, which I believe is the civil rights issue of our time, and must be a top priority for the financial services industry. By focusing on ways we can improve financial inclusion for Americans with disabilities, we can eliminate the barriers that have excluded them from access to quality, affordable financial services.”

Expanding the availability of safe and affordable credit and loan products to meet the needs of diverse and underserved communities, including people with disabilities, is a pillar of the NCUA’s financial inclusion initiative, ACCESS: Advancing Communities through Credit, Education, Stability, and Support. ACCESS builds on similar efforts underway at the NCUA and in credit unions that include building diverse and inclusive workforces and supplier chains, enhancing support for minority depository institutions, and supporting initiatives aimed at increasing opportunity for all Americans.

To learn more about the ACCESS Initiative, please visit https://www.ncua.gov/access.