Dear Boards of Directors and Chief Executive Officers:
This letter provides information about the provisions of the Consolidated Appropriations Act, 2021 that directly affect credit unions and their members. This act was signed into law on December 27, 2020, and, among other things, extends several provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Some of the Consolidated Appropriations Act, 2021 provisions that affect credit unions are described below.
Central Liquidity Facility
The CARES Act made several temporary, but substantive changes to Title III of the Federal Credit Union Act, which governs the Central Liquidity Facility. These changes were to sunset on December 31, 2020, but the Consolidated Appropriations Act, 2021 extended each of the CLF CARES Act provisions described below through December 31, 2021.
Additional information on the increased flexibility and borrowing authority provided to the CLF under the CARES Act, is detailed in Letter to Credit Unions 20-CU-08 and 20-CU-14, respectively.
As of December 18, 2020, the facility’s borrowing authority stood at $32.9 billion, an increase of $22.8 billion since April. In total, 4,105 credit unions, or 80 percent, of all federally insured credit unions now have access to the CLF, either as a regular member or through their corporate credit union. With the extension, this reinforced CLF will remain an important source of emergency liquidity to the system and the National Credit Union Share Insurance Fund as the pandemic and its associated financial and economic disruptions evolve.
Summary of CARES Act CLF Provisions
First, the CARES Act considerably increased the CLF’s borrowing capacity.1 The Federal Credit Union Act gives the CLF the authority to borrow, provided its obligations do not exceed twelve times the subscribed capital stock and surplus of the CLF (that is, the sum of its retained earnings and capital stock).2 The CARES Act temporarily increased the multiplier from twelve to sixteen. This means that, for every $1 of capital and surplus, the CLF can borrow $16. Credit unions that join the CLF only have to pay in one-half of the capital stock subscription amount, which means that for every new dollar paid in of the capital stock subscription amount, the CLF can borrow $32.3
Second, the CARES Act temporarily relaxed the requirements on agent membership, making such membership more economically feasible for corporate credit unions.4 Agent members are not required to buy capital stock for all of their member credit unions, but may buy CLF capital stock for a chosen subset of the credit unions the agent member serves.5 By reducing the stock purchase requirement and granting this flexibility, agent membership is more affordable for corporate credit unions.
Third, the CARES Act temporarily changed the definition of “liquidity needs” to include the needs of any credit union, not only natural-person credit unions.6 This amended definition broadened access by allowing the CLF to meet the liquidity needs of corporate credit unions.
Lastly, the CARES Act temporarily provided more flexibility for the NCUA Board to approve liquidity-need requests by removing the phrase “the Board shall not approve an application for credit the intent of which is to expand credit union portfolios.”7 By removing doubt about whether a credit union’s portfolio is allowed to expand if it borrows from the CLF to meet liquidity needs, this change increased the transparency and efficiency of the loan-approval process.
On April 13, 2020, the NCUA Board approved an interim final rule to make additional enhancements to the NCUA’s CLF rule, Part 725, and conform the regulation with the statutory changes in the CARES Act. These regulatory enhancements, two of which are permanent, provided flexibility, relief, and clarity for credit unions. Because of the extensions provided in the Consolidated Appropriations Act, 2021, the agency will assess whether additional regulatory changes are necessary.
Additional information about the CLF and the flexibilities provided in the CARES Act and subsequently extended in the Consolidated Appropriations Act, 2021 can be found on the CLF’s webpage.
Troubled Debt Restructuring
Section 4013 of the CARES Act (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) permitted financial institutions, including credit unions, to suspend the requirement to categorize certain loan modifications related to the COVID-19 pandemic as troubled debt restructurings through December 31, 2020. This authority is now extended through January 2, 2022, under the Consolidated Appropriations Act, 2021.
CECL Delay Extension
The CARES Act also exempted financial institutions from complying with the Current Expected Credit Loss (CECL) accounting standard until December 31, 2020 or the termination of the COVID-19 public health emergency, whichever occurs earlier. While the Consolidated Appropriations Act, 2021 extends this relief through January 1, 2022, federally insured credit unions are not required to comply with CECL accounting standards until January 1, 2023.8
Paycheck Protection Program
The CARES Act authorized the Small Business Administration (SBA) to create the Paycheck Protection Program (PPP), a loan guarantee program that helps certain affected businesses meet payroll needs and other covered operating expenses resulting from the COVID-19 pandemic. The Consolidated Appropriations Act, 2021 provides several amendments to the PPP, including an additional $284.5 billion in funding for first and second rounds of more easily forgivable PPP loans. Additionally, the act sets aside funds for loans made by specific types of institutions:
- Not less than $15 billion for guaranteeing loans made by community development financial institutions and minority depository institutions
- Not less than $15 billion for guaranteeing loans made by institutions with consolidated assets of less than $10 billion
Community Development Revolving Loan Fund
The Consolidated Appropriations Act, 2021 authorizes $1.5 million for the NCUA’s CDRLF until September 30, 2022, for technical assistance to low-income credit unions. For more information on the CDRLF, including application procedures, please visit the Grants and Loans page on NCUA’s website.
Community Development Financial Institutions
The Consolidated Appropriations Act, 2021 authorizes $12 billion in COVID-19 relief funding for community development financial institutions that predominantly serve minority communities. Approximately a third of this $12 billion is set aside for smaller financial institutions with less than $2 billion in assets.
Additionally, the Consolidated Appropriations Act, 2021 provides the Community Development Financial Institutions Fund with $270 million in supplemental funding. More information regarding the terms of the funding and the application process will be provided once available.
If you have any questions about the provisions of the Consolidated Appropriations Act, 2021, please contact your NCUA Regional Office or e-mail your questions to COVID19Questions@ncua.gov.
Rodney E. Hood
1 The CLF borrows from the U.S. Treasury’s Federal Financing Bank to make loans to member credit unions and the Share Insurance Fund.
2 12 U.S.C. § 1795f(a)(4)(A).
3 Credit unions must subscribe to the CLF capital stock in the amount of one-half of one percent of the credit union’s six month average of paid-in and unimpaired capital and surplus (that is, the total of shares and deposits and undivided earnings). Credit unions only have to remit to the CLF one-half of the subscription amount (one-quarter of one-percent of paid-in and unimpaired capital and surplus), and may hold the remaining half (which is callable by the NCUA Board).
4 A credit union or group of credit unions that primarily serve other credit unions may become an Agent member by meeting certain requirements outlined in 12 U.S.C. § 1795c(b).
5 12 U.S.C. § 1795c(b)(2).
6 Id. § 1795a(1).
7 Id. 12 U.S.C. § 1795e(a)(1).
8 See Financial Accounting Standards Board Accounting Standards Update No. 2016-13, Measurement of Credit Losses on Financial Instruments.