At its latest board meeting, the National Credit Union Administration (NCUA) approved a final rule amending the chartering and field-of-membership (FOM) rules for credit unions applying for a community charter approval, expansion, or conversion.
The change was among four items approved by the board.
The FOM final rule change would help facilitate greater access to safe and affordable financial services, NCUA stated.
“Today, with this rule, the board is taking a critical step in the NCUA’s ongoing work to allow credit unions to alleviate some of the difficulties of low-income and underserved Americans in accessing financial services,” NCUA Chairman Rodney Hood said in a release. “I often call financial inclusion the civil rights issue of our time, and this rule will help maintain and expand financial access to more Americans in rural and underserved communities.”
Other items approved by the board were:
- A proposed rule that would phase-in the day-one adverse effects on regulatory capital that may result from the adoption of the current expected credit losses (CECL) accounting methodology over a three-year period.
- A proposed rule that amends the NCUA’s regulation governing the assessment of an annual operating fee on federal credit unions.
- A request for comment on the existing overhead transfer rate and the operating fee schedule methodologies.
The final FOM rule, which was approved unanimously, re-adopts a provision to allow an applicant to designate a combined statistical area, or an individual, contiguous portion thereof, as a well-defined local community if the chosen area has a population of 2.5 million or fewer.
Credit unions that had their combined statistical areas removed from their fields of membership because of litigation will be contacted by the agency to determine if they would like those reinstated. If they would, then NCUA will do so as soon as the rule is effective.
Separately, in accordance with an August 2019 opinion and order issued by the D.C. Circuit Court of Appeals, the final rule provides further explanation and support for the elimination of the requirement to serve a core-based statistical area’s core area, as provided in the agency’s 2016 field-of-membership rule.
The rule also clarifies existing requirements and adds an explicit provision to the NCUA’s FOM regulations to address concerns about potential discrimination in the selection process for combined statistical areas and core-based statistical areas.
The rule is effective 30 days after publication in the Federal Register.
The other notable move was a proposal to phase in effects of CECL accounting.
“The proposed CECL change has raised serious questions in the credit union industry, as well as among other smaller financial services providers, as it would entail greater complexity, higher costs and a significantly heavier compliance burden, while bringing little additional benefit to the institutions,” Hood stated. “As such, it is unwise to impose a burdensome and costly new regulation on credit unions, particularly smaller institutions in underserved areas, at such a time of great challenge.”
Under the proposal, the NCUA board would phase-in the day-one effects on a federally insured credit union’s net worth ratio over a three-year period, under the NCUA’s prompt corrective action regulations. The proposed rule temporarily would mitigate the adverse consequences of the day-one capital adjustments, while requiring that credit unions account for CECL for other purposes, such as on their Call Reports.
The phase-in would be applied only to those federally insured credit unions that adopt the CECL for the fiscal years beginning on or after Dec. 15, 2022. Credit unions that decide to adopt CECL for the fiscal years beginning before that date would not be eligible for the phase-in.