The NCUA Board sent a letter to credit unions yesterday outlining the administrative order the NCUA approved pursuant to § 702.201 that reduces the amount of earnings retention required for credit unions classified as adequately capitalized. The letter also clarifies credit unions’ authority to submit a streamlined net worth restoration plan if their net worth ratio declined to undercapitalized, predominantly due to temporary share growth during the COVID-19 pandemic.
“With this change, NCUA has given adequately capitalized credit unions the ability use their earnings to continue to serve their members rather than to hold them to satisfy a regulatory retention requirement,” said Mike Lee, LSCU’s director of regulatory advocacy. “Furthermore, for those credit unions that see a reduction in their net worth ratio, primarily because of events associated with the pandemic, NCUA has developed a quicker and easier means to comply with the requirement to submit a net worth restoration plan. So both of these changes show NCUA is committed to helping credit unions help members and have been proactive in making regulatory adjustments as the pandemic has affected members, credit unions, and the economy as a whole.”
The letter follows the unanimous approval of an interim final rule at the NCUA Board’s May meeting that makes two temporary changes to the agency’s prompt corrective action regulations that provide relief to credit unions that temporarily fall below well capitalized.
“Because of the pandemic, I am concerned that credit unions may temporarily fall below the well-capitalized level and become subject to various prompt corrective action requirements,” said NCUA Chairman Rodney Hood, following approval of the interim final rule. “This rule provides relief to those that experience a decline in their net worth ratio because of efforts to help their members or because they have experienced a rapid increase in shares because of the flight to safety.”