Trade groups push NCUA for stronger response to coronavirus

Credit union trade groups are urging the National Credit Union Administration to provide greater relief as measures to slow the spread of the coronavirus wreak havoc on the economy.

The National Association of Federally-Insured Credit Unions and the Credit Union National Association are calling for the regulator to delay implementing the current expected credit loss standard to at least 2024.

The industry has pushed for CECL delays in the past, arguing that credit unions shouldn't be subject to CECL at all. The Financial Accounting Standards Board agreed in July 2019 to push back the implementation date for credit unions by one year from January 2022 to January 2023. NCUA Board Member Mark McWatters even previously voiced his own reservations about the need for the standard.

“Credit unions that are directing staff resources to managing the crisis do not have time to model new forecasts in support of a highly complex accounting change that was deemed by many, even prior to the crisis, unnecessary for ensuring the stability of the credit union industry,” NAFCU President and CEO Dan Berger wrote in a letter to the NCUA board on March 25.

NCUA did not respond to Credit Union Journal’s request for comment.

Berger added that transitioning to the new standard during a recovery period may have unintended consequences. He suggested that NCUA demand greater control over the CECL standard’s application to credit unions.

CUNA also demanded a change in the criteria for designating a credit union as low income. Once a credit union’s field of membership reaches a 10% unemployment threshold, CUNA requested that the regulator to give that institution the LICU designation for a fixed period of time. CUNA argued that a high unemployment rate for an institution’s membership was a strong indicator of economic distress.

Unemployment has skyrocketed as officials across the country have closed non-essential businesses and economic activity has slowed dramatically. Last week more than 3 million Americans applied for unemployment benefits, beating the previous record of 695,000 in October 1982.

Calling for parity between credit unions and banks, CUNA's President and CEO Jim Nussle urged NCUA to expedite the board's rule making on moving the threshold level for residential real estate-related transactions from $250,000 to $400,000.

In November, NCUA voted unanimously to approve a proposed rule that would raise the threshold. That vote opened up a 60-day public comment period.

“As you might imagine, full appraisals are a difficult service to obtain now and increasing the threshold to match what the banks currently have would be especially helpful for credit unions,” Nussle wrote in a letter to Chairman Rodney Hood on March 24.

As for access to secondary capital, NAFCU urged NCUA to fast-track secondary capital applications so that LICUs could have additional room to use relief programs under the CARES Act. Expanding access to secondary capital — something that has long been a controversial topic and generally opposed by bankers — would contribute to faster economic recovery, Berger argued.

Suspending onsite examinations and data collections for at least 120 days was sought by the groups as well. On March 16, NCUA announced that it would halt in-person exams and complete them remotely for a few weeks.

The advocacy organizations also requested a delay in submitting call report data and other exam-related information. On Thursday, financial regulators announced they would not penalize institutions that submit late call reports. The deadline is March 31 but institutions will have an additional 30 days to file.

“The NCUA must act quickly to implement capital relief for credit unions that is, at the very least, equivalent to what is being offered to banks during this time of crisis,” Berger concluded in his letter.