NCUA Board Approves Draft Strategic Plan, Final Rule on Shared Services Facilities

Board Action Bulletin

ALEXANDRIA, Va. (Nov. 18, 2021) – Through a live webcast, the National Credit Union Administration Board held its tenth open meeting of 2021 and approved two items:

• The publication of the NCUA’s draft Strategic Plan 2022–2026 for public comment.
• A final rule that changes the definition of a service facility in the agency’s chartering in field-of-membership requirements.

In addition, the NCUA Board was briefed on the performance of the National Credit Union Share Insurance Fund in the third quarter of 2021, along with the agency’s modernized examination tools and response to the COVID-19 pandemic.

NCUA’s 2022–2026 Strategic Plan Approved for Comment

The NCUA Board unanimously approved the NCUA’s draft Strategic Plan 2022 –2026, which describes the agency’s proposed strategic goals and objectives for the next five years, summarizes an analysis of the internal and external environment impacting the NCUA, and evaluates the agency’s programs and risks. The draft plan also includes sample performance metrics the agency can use to monitor its performance and strategies that describe how the agency will achieve its strategic goals and objectives. 

“For any organization, strategic planning is an essential process for outlining where the organization is going, how it will get there, and what investments are needed to achieve organizational goals,” said NCUA Chairman Todd M. Harper. “We must continue efforts to expand access to safe, fair, and affordable financial services, provide financial education, and close the racial wealth gap. We must also address demographic and economic trends. And, we must continue to address the economic fallout of the COVID-19 pandemic, which will likely have lasting effects for some time to come. The proposed strategic plan considers each of these matters and the potential risks they pose to our programs and the broader credit union system.”

In addition, the draft Strategic Plan highlights the agency’s revised mission and vision statements, along with these three strategic goals for 2022–2026:

• Ensure a safe, sound, and viable system of cooperative credit that protects consumers.
• Improve the financial well-being of individuals and communities through access to affordable and equitable financial products and services.
• Maximize organizational performance to enable mission success. 

Comments on the draft Strategic Plan are due 60 days after publication in the Federal Register.

Final Rule on Shared Services Facilities Modernizes Requirements

The NCUA Board unanimously approved a final rule that revises the definition of service facility for multiple common-bond federal credit unions contained in the NCUA’s Chartering and Field of Membership Manual.

For purposes of adding groups, the final rule includes any shared branch, shared ATM, or shared electronic facility in the definition of “service facility” for a multiple common-bond federal credit union that participates in a shared branching network. The federal credit union does not need to be an owner of the shared branch network for the shared branch or shared ATM to be a service facility. 

Said Chairman Harper, “While I opposed the proposed rule issued last December, I will join my fellow Board members in support of this final rule because we have corrected the deficiencies contained in the original plan and because the rulemaking has the potential to expand access to safe, fair, and affordable financial services to individuals, including those who live in underserved communities.”

A location must accept deposits, take loan applications, and disburse loan proceeds to qualify as a service facility for an underserved area. Just as for select group additions, an ownership interest in a shared branching network is no longer a requirement for a multiple common-bond federal credit union using a shared facility to add an underserved area.

The final rule does not include other changes proposed to the definition of service facility found in the December 2020 proposed rule. In particular, the final rule retains the provisions of the current rule requiring that service facilities for purposes of underserved area additions offer more services than service facilities for purposes of group additions. Thus, just as under the current Chartering Manual provisions, ATMs are not service facilities for underserved area additions.

The final rule is effective 30 days after publication in the Federal Register.

Share Insurance Fund Reports $20.9 Billion in Assets in the Third Quarter

The NCUA’s Chief Financial Officer briefed the NCUA Board on the performance of the National Credit Union Share Insurance Fund for the quarter ended Sept. 30, 2021.

The National Credit Union Share Insurance Fund reported a net income of $58.6 million and $20.9 billion in assets for the third quarter of 2021. The Share Insurance Fund also reported $59.8 million in total income for the third quarter of 2021. 

“While the Share Insurance Fund is showing solid performance and the equity ratio is projected to rise to 1.28 percent at the end of the year, the NCUA must continue to monitor credit union performance and economic developments,” Harper said. “Additionally, the stresses on the equity ratio from continued share growth, the low interest-rate environment, at least historically, and insurance losses remain. The agency will need to continue to analyze the Fund’s risk exposure.” 

The Share Insurance Fund in October received additional capitalization deposits of approximately $1.1 billion from insured credit unions after the NCUA invoiced for its semi-annual contributed capital adjustment for credit unions with $50 million or more in assets.

Additionally, for the third quarter of 2021:

• The number of CAMEL codes 4 and 5 credit unions decreased 2.1 percent from the end of the second quarter, to 141 from 144. Assets for these credit unions decreased 3.3 percent from the second quarter to $8.8 billion from $9.1billion.
• The number of CAMEL code 3 credit unions decreased 0.7 percent from the end of the second quarter, to 759 from 764. Assets for these credit unions decreased 1.5 percent from the second quarter to $47.4 billion from $48.1 billion.

At the end of the third quarter of 2021, there were six federally insured credit union failures that cost the Share Insurance Fund $4.8 million in losses.

The third-quarter figures are preliminary and unaudited. Additional information on the performance of the Share Insurance Fund is available on NCUA.gov.

Board Briefed on NCUA’s Modernized Examination Tools

Staff from the NCUA’s Office of Business Innovation briefed the Board on NCUA’s modernized examination tools, describing how these new tools and systems provide value for NCUA staff and external stakeholders. 

The briefing covered three NCUA applications that have a web-based, common entry point: the Admin Portal, the Data Exchange Application (DEXA), and the Modern Examination & Risk Identification Tool (MERIT). 

“Since joining the NCUA Board, I have often noted that three of the main tenets of my regulatory philosophy are that the NCUA should be innovative, forward-looking, and risk focused,” said Harper. “Just as the world changes and the credit union industry evolves, the NCUA must also adapt to marketplace and technological developments. That is exactly what we are doing through the deployment of the new Modern Examination and Risk Identification Tool and its associated systems, which together will modernize the agency’s examination, data collection, and reporting efforts.”

Credit unions can access additional information on these resources on the Enterprise Solution Modernization Program webpage on NCUA.gov.

Briefing Provides Update on NCUA’s Response to the COVID-19 Pandemic

An update on the NCUA’s response to the COVID-19 pandemic was presented to the NCUA Board by staff from the Office of Examination & Insurance. 

“None of us could have anticipated the extraordinary circumstances we found ourselves in these past 20 months, yet the NCUA team has exhibited tremendous resilience,” Harper said. “By swiftly pivoting to a telework environment and continually working to address emerging risks, we have met the many challenges posed by the pandemic, including its economic fallout.”

Throughout the pandemic, the NCUA focused on three priorities:

• Protecting the health and safety of NCUA staff and contractors, so the agency can continue to perform its mission;
• Assessing the impact of COVID-19 on credit union members and operations; and
• Analyzing how the pandemic will affect the future financial condition of credit unions and the Share Insurance Fund.

The presentation covered targeted, tailored, and temporary regulatory reforms that have been taken since the pandemic began, including annual meeting flexibilities, prompt corrective action adjustments, loan participations, and virtual examinations, among other measures.

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.