Here we will be going over and explaining some of the pending regulations being set forward by the National Credit Union Association (NCUA) and how they directly affect your CU.
First, we will go over the proposed corporate credit union regulation, and a little of what that will entail. According to the National Credit Union Association, the proposed rule would clarify and give a better description of multiple provisions of the NCUA’s corporate credit union regulation. Some changes would include allowing a corporate CU to make a minimal investment within a CUSO without the actual CUSO having to be classified as a corporate CUSO under the NCUA’s rules, as well as expanding the categories of senior staff positions at member credit unions, allowing them to serve on a corporate CU’s board.
The next proposed regulation deals with Joint Ownership Accounts. The NCUA board also proposes to amend its share insurance regulation, ruling over the requirements for a share account to be separately insured as a joint account by the NCUSIF. Specifically, the proposed rule would be able to provide another method to satisfy the membership card or account signature card necessary for insurance coverage. Within this proposal, even if an insured CU can’t produce membership cards or account signature cards signed by the joint accountholders, the signature requirement could possibly be satisfied by information just contained in the account records of the insured CU.
Moving on, you and your CU should be up to date on the new proposed regulation regarding the Combination Transaction with non-credit unions which is the Credit Union Asset Acquisition Proposal. This proposed regulation should be able to regulate and clarify while leaving no room for interpretation, in relation to the procedures and requirements currently in place for combination transactions. Combination transactions include those where a FICU proposes to assume liabilities from a non-credit union, including a bank. They also include a FICU’s merger or consolidation with a non-credit union entity.
Diving into the regulation regarding Subordinated Debt and what changes are being added to other propositions regarding it, it is being propositioned to make some minor changes to the regulation, and make it clearer to various parts of the NCUA’s regulations to permit low income designated CUs, Complex CUs and New CUs to issue Subordinate Debt for purposes of regulatory capital treatment. This new proposed rule would create a new subpart within the NCUA’s final risk-based capital rule, addressing the requirements related to applying for authority to issue Subordinated Debt, credit union eligibility, prepayments, disclosures, securities laws, and the terms of a Subordinated Debt Note.
Another regulation is called Regulation E. This regulation implements the Electronic Fund Transfer Act (EFTA). This new regulation will be covering disclosure requirements, liability limits, and other member protections that are in relation to electronic transfers. Regulation E applies to electronic fund transfers that are debited or credited to a member’s account by a CU. The covered transactions from the account could include online bill payments, ATM transfers, transfers imitated by telephone, and a few others that fall under this regulation. This regulation ensures protection for the member and most of their banking done electronically.
While these new and upcoming regulations are not even the tip of the iceberg in this ever-changing CU world, they are just some to stay on top of, to make sure your credit union is following all the appropriate guidelines and taking the correct steps to remain compliant. Along with those propositions, the availability of government relief packages, following the unprecedented event of COVID-19 continues to evolve quickly. In regard, the application and lending terms of the PPP (Paycheck Protection Program) have been extended once again, and have a big possibility of extending in the near future. According to Blue & Co., as of now the extension lasts an additional 24 weeks or until December 31, 2020, whichever comes first. The covered period is the amount of time a company has to expend the PPP loan funds in order to obtain forgiveness from the SBA, and was initially set at eight weeks from the date the loan was funded.
An afterthought to some, might be the struggles businesses have faced. While they are still allowed to carry on with “business as the new norm,” they have most likely faced financial challenges as well, when it comes to having to continue changing and evolving with all the new guidelines and regulations. Also, those businesses deemed essential are facing a loss in revenue as well, with shelter-in-place guidelines extending all over. With this type of unprecedented disruption in the economy, financial institutions are highly likely to suffer increasing losses by quarter four of this year and the first quarter of next year (year-over-year). According to Accounting Today, the next quarterly report will provide even more telling information about the impact of the pandemic on corporations.
When it comes to consumer lending, the Consumer Protection Bureau has also made known that it will be postponing quarterly reporting under the Home Mortgage Disclosure Act, which will allow financial institutions to focus their resources on assisting consumers during this time. It has also been noted that enforcement activities against the same financial institutions will be taking into account the staffing and resource challenges currently faced by the institutions. As more consumers receive CARES Act funding, they may rely less on consumer lending in the short term. Knowing all of these new funding options and regulations will help you better navigate the future of your CU.