Board Action Bulletin
Board Briefed on Supervisory Priorities, Status of Central Liquidity Facility
ALEXANDRIA, Va. (Jan. 27, 2022) – The National Credit Union Administration Board held its first open meeting of 2022 through a live webcast and approved a proposed rule on succession planning. The NCUA Board was briefed on the NCUA’s 2022 supervisory priorities and the status of the Central Liquidity Facility following the statutory expiration of its enhanced authority. The Board was also briefed on required inflation adjustments to the agency’s civil monetary penalties, which were approved by a notation vote at the end of 2021.
Proposed Rule Would Require Federal Credit Unions to Have Succession Plans
The NCUA Board approved by a vote of 2-1 a proposed rule that would require boards of directors at federal credit unions to establish and adhere to processes for succession planning.
“At its core, this rulemaking is about federal credit unions of all sizes — especially smaller credit unions that do not already have succession plans — planning for their futures, so they can continue to serve their members for generations to come as independent entities,” said NCUA Chairman Todd M. Harper. “Small credit unions are at the heart of the movement, and we need to find a better way to preserve them, instead of consolidating them.”
Under the proposed rule, credit union directors would also be required to have knowledge of the federal credit union’s succession plan. The proposed rule would provide federal credit unions with broad discretion in implementing the proposed regulatory requirements to minimize any burden. Although the proposed rule would apply only to federal credit unions, the NCUA Board encourages all credit unions, regardless of asset size, to have a succession plan to fill key positions and ensure their credit unions continued operations.
Comments on the proposed rule must be received no later than 60 days following publication in the Federal Register.
Central Liquidity Facility Remains Strong and Able to Meet Liquidity Needs
The NCUA’s Office of Examination and Insurance briefed the Board on the Central Liquidity Facility’s status following the expiration of the enhanced authority provided in the Coronavirus Aid, Relief, and Economic Security (CARES Act) and Consolidated Appropriation Act, 2021.
“With currently more than $26 billion in borrowing capacity, I am pleased to see the CLF remains a strong source of emergency liquidity should the need arise in 2022,” said Chairman Harper. “However, the expiration of the enhanced borrowing authority and other CLF provisions in the Coronavirus Aid, Relief, and Economic Security Act is concerning, especially with the pandemic and its financial and economic disruptions continuing into this year.”
The CARES Act made several changes to Title III of the Federal Credit Union Act, which governs the CLF. These changes were scheduled to sunset at the end of 2020. The Consolidated Appropriations Act, among other things, extended the sunset date of these CLF enhancements to Dec. 31, 2021.
The CLF’s borrowing authority stands at $26 billion at the start of 2022. In total, 3,995 credit unions, or 80 percent of all federally insured credit unions, have access to the CLF, either as a regular member or through their corporate credit union. Additional information, including how credit unions can join the CLF is available at www.ncua.gov/clf.
In November 2021, the NCUA Board issued a joint letter calling on Congress to make permanent the CLF enhancements made under the CARES Act.
“I want to assure all stakeholders that restoring and making permanent the enhanced authorities provided to the Central Liquidity Facility as part of the CARES Act remains front and center for the NCUA,” Harper added. “My fellow Board members and I are committed to working with Congress on this vital legislative priority.”
Supervisory Priorities in 2022 Include Credit and Interest Rate Risk, Consumer Financial Protection and Cybersecurity
The Offices of Examination and Insurance and Consumer Financial Protection briefed the NCUA Board on the agency’s 2022 supervisory priorities. The briefing also included updates on the implementation of NCUA Connect and MERIT, and the recently approved final rule that adds the “S” or market sensitivity component to the CAMELS rating system. Stakeholders also received information on the recording of official meetings between credit unions and NCUA examiners.
“During the last year, I have frequently noted the agency’s top priority is to ensure the credit union system and the National Credit Union Share Insurance Fund can adapt to the evolving nature of the COVID-19 pandemic and its financial and economic disruptions,” Harper said. “The NCUA’s supervisory priorities in 2022 reflect that need by focusing on the areas of the greatest risk to credit unions, members, and the broader system.”
In 2022, the NCUA’s examination program will focus on the following areas:
- Credit risk management
- Information security (cybersecurity)
- Consumer financial protection
- Payment systems
- Fraud
- London Inter-Bank Offered Rate (LIBOR) transition
- Bank Secrecy Act and anti-money laundering compliance/Countering the financing of terrorism
- Capital adequacy and risk-based capital rule implementation
- Loan loss reserving
- Loan participations
- Interest rate risk
Additional information on the NCUA’s supervisory priorities can be found in Letter to Credit Unions, 22-CU-02, NCUA’s 2022 Supervisory Priorities.
Board Briefed on Required Inflation Adjustments to Civil Monetary Penalties
The Office of General Counsel briefed the Board on the required inflation adjustments for the maximum amounts for civil monetary penalties under its jurisdiction, as required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015.
The act requires agencies to adjust the maximum amounts of civil monetary penalties annually to account for inflation. The NCUA Board previously approved these adjustments by notation vote on Dec. 30, 2021.
The NCUA tweets all open Board meetings live. Follow @TheNCUA 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.