During its October meeting, the NCUA Board approved the following five items:
- A final rule modernizing existing field-of-membership definitions for federal credit unions to improve consumer access to affordable credit.
- A proposed rule to provide further field-of-membership community charter options for federal credit unions.
- A final rule adjusting civil monetary penalties for inflation, as required by Congress.
- A final rule re-naming NCUA’s consumer office as the Office of Consumer Financial Protection and Access to clarify its function and role in promoting consumer access to affordable financial services.
- An interagency proposed rule to implement the private flood insurance requirements for loans in special flood hazard areas contained in a 2012 statute.
The Office of Examination and Insurance also briefed the Board on issues relating to credit unions using supplemental capital for risk-based capital calculations.
Final Rule Adjusts Maximum Amount of Civil Monetary Penalties
The NCUA Board approved a final rule (Part 747) to amend its regulations and adjust the maximum amount of civil monetary penalties under its jurisdiction to account for inflation.
At its June open meeting, the Board approved an interim final rule making the adjustments. The final rule adopts those changes, which were required by the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015.
NCUA last adjusted civil monetary penalties in September 2015. Previously, these inflation adjustments were made every four years. In November 2015, Congress enacted legislation requiring annual adjustments and providing for a one-time “catch-up” adjustment for 2016. Beginning in 2017, agencies must publish their inflation adjustment rules in the Federal Register by Jan. 15 of each year.
Although the law requires NCUA to adjust the maximum levels for civil monetary penalties, NCUA is not required to assess the maximum level and retains discretion to assess at lower levels, as it has done historically. For example, the civil monetary penalties NCUA assesses for Call Report filers are modest; the median penalty was $274 for the first quarter of 2016. The Federal Credit Union Act requires NCUA to send any funds received through civil monetary penalties to the U.S. Treasury.
The final rule is effective July 21. For more information, go to http://go.usa.gov/xkFPs (opens new window).
Name Change Better Reflects Consumer Office’s Role
The NCUA Board approved a final rule (Parts 708 and 790) to change the name of the Office of Consumer Protection to better reflect its role in facilitating consumer access to credit unions.
The office now will be known as the Office of Consumer Financial Protection and Access. Adding the word “financial” to the office’s title clarifies that the focus is on consumer financial protection, rather than other consumer issues. Adding “access” to the title highlights the office’s duties in the areas of chartering and field of membership.
Providing greater clarity in the office’s title about its consumer financial protection and access to financial services mission will benefit consumers, their communities and credit unions.
For more information, go to http://go.usa.gov/xkFP6 (opens new window).
Proposed Rule Would Amend Flood Insurance Regulations
The NCUA Board approved an interagency proposed rule (Part 760) that would implement statutory requirements for private flood insurance.
The proposed rule would require regulated lending institutions, such as credit unions, to accept flood insurance policies that meet the statutory definition of “private flood insurance” in the Biggert-Waters Flood Insurance Reform Act of 2012. It also would permit those lenders to accept private flood insurance policies that do not meet that definition on a discretionary basis, subject to certain restrictions.
NCUA issued the proposed rule along with the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Farm Credit Administration.
Comments on the proposed rule are due Jan. 6, 2017. For more information or to submit a comment, visit http://go.usa.gov/xkuKV (opens new window).
Supplemental Capital Needs Careful Consideration
The inclusion of supplemental capital as part of the calculations for the risk-based capital rule raises legal and regulatory questions for federally insured credit unions, experts with the Office of Examination and Insurance told the NCUA Board in a briefing.
The Board approved a risk-based capital final rule (opens new window) at its October 2015 open meeting, but deferred action on the issue of supplemental capital. Agency staff have since explored the concept of supplemental capital, including researching studies on its use, reviewing applicable securities and tax laws, and holding discussions with industry experts and credit unions interested in using it.
Staff raised several important questions that must be answered before allowing credit unions to use supplemental capital in the risk-based capital regime, including:
- Who—individual or institutional investors—would be allowed to purchase these securities;
- What tax laws and securities laws—such as anti-fraud laws—would apply; and
- What disclosure standards would apply.
Further regulation, staff said, would be necessary to allow for supplemental capital activities to be conducted in a safe and sound manner and to protect the National Credit Union Share Insurance Fund, such as the permanency of the capital, its capacity to absorb losses and the flexibility of payments. Rulemaking could also include streamlining some existing regulations.
NCUA’s Board is expected to issue an advance notice of proposed rulemaking on supplemental capital in early 2017. The notice will collect stakeholder comments and recommendations on the use of supplemental capital by credit unions.