As Prepared for Delivery on February 17, 2022
Thank you, Kathryn, Kelly, and Marvin, for your informative presentation today and for the great work by you and the rest of the NCUA team in bringing before the NCUA Board this interim final rule to extend temporary adjustments to our prompt correction action rules. I would also like to thank Vice Chairman Hauptman and Board Member Hood for their continued support for these tailored, targeted, and temporary COVID-19 pandemic-assistance measures.
For nearly two years, the pandemic has greatly affected the credit union system and our nation’s economy. We, however, likely have not yet seen the full impact of the pandemic on consumer credit union balance sheets and performance. As such, the renewal of these targeted measures for another year is a prudent course of action at this time.
This interim final rule renews two important changes to the NCUA’s prompt corrective action rules. The first change temporarily reduces the earnings retention requirement for federally insured, consumer credit unions classified as adequately capitalized. While this rule is in effect, those credit unions unable to meet the earnings retention requirement will not have to submit a written application requesting approval to decrease their set-asides for earnings.
The second change temporarily permits an undercapitalized credit union to submit a streamlined net worth restoration plan if it becomes undercapitalized primarily because of continued share growth. If a consumer credit union becomes less than adequately capitalized for reasons other than share growth, it must still submit a net worth restoration plan under the current requirements in NCUA regulations.
With inflation, interest rate risk, and labor market and supply chain disruptions likely to continue well into 2022, and potentially beyond, consumer credit unions have much to manage. By continuing these short-term assistance measures, eligible credit unions will be able to focus their limited resources on serving their members’ needs — especially those of modest means and communities of color — instead of planning for earnings transfers and developing detailed net worth restoration plans.
With that said, I do have several questions for staff. First, what financial or economic factors were included in your analysis to support renewing these tailored relief measures?
Thank you for those insights. My next question is for Kathryn. Over the course of the pandemic, how has the number of well-capitalized and adequately capitalized credit unions changed over the last two years?
Thank you. Finally, Kathryn, how many credit unions are still reporting higher assets today than at the start of the pandemic, and how have those credit unions been performing, overall, during the period you analyzed?
Thank you, Kathryn.
These answers all illustrate the need for continuing this targeted and temporary pandemic-assistance measure, and I will support this interim final rule. That concludes my remarks. I now recognize Vice Chairman Hauptman.