Week ahead: NCUA to address exams, possible capital changes

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Credit unions could soon have a clearer expectation of how soon NCUA examiners might be back in their facilities.

The National Credit Union Administration will consider the future of credit union examinations when the agency’s board convenes Thursday for its June open board meeting. Last week the regulator indicated on-site exams could resume as soon as July. NCUA developed a transition plan for resuming in-person which could happen as early as July 6. The regulator said that conducting voluntary on-site examinations could be part of the first phase.

The board meeting will also include a briefing on the 2019 Minority Depository Institution Annual Report. The number of MDI credit unions continues to decline, according to NCUA, down 3% last year to 514 in operation. NCUA’s Office of Credit Union Resources and Expansion oversees its Minority Depository Preservation Program, which provides those institutions with technical assistance, training, mentoring, merger help when needed, chartering assistance and more.

In order to qualify as an MDI, at least 50% of a credit union’s current membership and potential membership must be minorities, as well as at least 50% of its board of directors.

Also on the docket a proposed rule on risk-based net worth. Though details are sparse on what the rulemaking might entail, some observers believe this could be the agency’s attempt at creating a credit union version of the Community Bank Leverage Ratio. The agency first announced those plans one year ago when implementation of its controversial risk-based capital rule was once again delayed, this time in part to buy the agency more time for a broader look at credit union capital standards. It’s unclear if Thursday’s meeting will cover that topic, however, and some have suggested the proposed rule could relate to the Paycheck Protection Program liquidity facility instead.

The meeting will also feature a briefing on NCUA's Guaranteed Notes Program, which was created nearly 10 years ago to provide long-term funding for distressed investment securities from five corporate credit union failures.

Both chambers of Congress are also in session this week, with much of their focus turned to police reform. Some issues related to credit unions an finance are expected to be addressed, however, including a Senate Banking Committee hearing on oversight of the U.S. Export-Import Bank. NCUA and the Ex-Im Bank recently signed a three-year partnership agreement. The House Financial Services Committee is also expected to meet this week, with a hearing Thursday on capital markets and emergency lending during the coronavirus pandemic, as well as a meeting Friday examining challenges surrounding insurance for policyholders and insurers alike.

Major primary votes are also scheduled for this week, with elections taking place tomorrow in Kentucky, New York and Virginia. The Kentucky primary will determine which Democrat will face Senate Majority Leader Mitch McConnell in November’s general election.

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Law and regulation Exams Risk-based capital Risk-based capital rule Election 2020 NCUA Compliance