Threshold for increase in ONES oversight seen as ‘natural evolution’ by NCUA board

NCUA lobby.

At its second 2022 meeting on Thursday, the NCUA Board of Directors approved a Notice of Proposed Rulemaking to change the asset threshold for large credit unions that work with the Office of National Examinations and monitoring (ONES).

According to details from the NCUA, the proposed rule would increase the asset threshold for credit unions that fall under ONES’s enhanced oversight from $10 billion to $15 billion.

“This proposed rule is a natural evolution in the agency’s review program as the number of large, complex credit unions grows,” said NCUA Chairman Todd Harper. “It leverages the strengths of the agency’s regional structure to ensure that the NCUA can efficiently and effectively monitor potential risks associated with these institutions with existing resource allocations and it provides appropriate oversight of these systemically critical credit unions. , which present a significant risk for the insurance side. funds due to their size and complexity.

Under the proposed rule, credit unions with total assets between $10 billion and $15 billion would continue to be supervised by the appropriate NCUA regional office, while large credit unions already under the supervision of ONES would continue to be supervised by the office.

Public comments on the notice of proposed rulemaking must be received no later than 60 days after publication in the Federal Register.

Rapid corrective action Extended relief

During Thursday’s meeting, the board also approved an interim final rule that would renew two temporary changes to the NCUA’s Rapid Remedies Regulations that were put in place at the start of the pandemic to ensure that credit unions remain operational and liquid.

Both changes include the following:

  • Amend the regulations to temporarily expand the Board’s ability to issue an order applicable to all federally insured credit unions to waive the profit retention requirement for any federally insured credit union that is classified as sufficiently capitalized.
  • A provision that changes the specific documentation required for equity restoration plans of federally insured credit unions that become underfunded.

“For nearly two years, the pandemic has greatly affected the credit union system and the economy of our country,” said Harper. “However, we have probably not yet seen the full impact of the pandemic on the balance sheets and performance of consumer credit unions. As such, renewing these targeted measures for another year is a prudent course of action at this time.

The temporary changes will be in place until March 31, 2023.

Share Insurance Fund Update

NCUA board members received an update on the overall health of the equity insurance fund (SIF) through the end of 2021. According to data provided to the board, the ratio SIF’s equity ratio currently stands at 1.26%, an increase from 1.23% in June 2021. The equity ratio was below the Board-approved normal operating level of 1.33%.

“After another challenging year, the Share Insurance Fund continues to perform well and remains on a solid footing,” Harper said. “Overall, the credit union system has also, so far, resisted the evolving economic fallout from the pandemic. This is a testament to the strength of the credit union system in the face of the pandemic and the skillful management of credit union CEOs, boards and staff over the past two years.

According to the NCUA, SIF’s net income is $184.5 million, with a net position of $20.6 billion at the end of 2021.

Seven credit union bankruptcies resulted in a loss to SIF in 2021, compared to one credit union bankrupt in 2020. The cost of bankruptcies in 2021 was $5.6 million.

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