Regulatory reform

The National Credit Union Administration this week will consider an interim final rule regarding its Central Liquidity Facility and changes to real estate appraisal requirements.

Critics who argue this crisis mirrors the 2008 financial panic when Congress bailed out banks have it wrong. The new relief package in response to the coronavirus pandemic was necessary to save livelihoods, and more can be done.

Measures that delay the Current Expected Credit Losses standard and reduce a community bank capital ratio are temporary, but the industry now sees an opening to argue that they should be permanent.

The regulator must speed up its capital reform efforts while taking immediate steps to reduce the examination burden.

The government should encourage community lenders to offer six-month loan repayment forbearances to struggling businesses before it’s too late.

Some regulators had started shifting to more remote oversight before the pandemic, though the initiatives haven't been a priority for credit unions and their advocates.

After Congress temporarily lowered the leverage ratio used by smaller institutions, the federal agencies said they would allow a one-year transition before banks have to comply again with the regular standard.

The agency proposed changes in December to how customer relationships affect the definition of brokered funds, which has big implications for banks that are not well capitalized.

The agencies will give the industry another month to submit feedback on the so-called covered fund portion of the rule "in light of potential disruptions resulting from the coronavirus.”

If Capitol Hill plans another round of stimulus, Democrats could have more leverage to demand steps such as suspending overdraft fees – a measure which could have a big impact on credit union revenue.