Fourth Round of NCUA Deregulatory Proposals
The deregulatory march goes on at NCUA. On January 22nd, my colleague Kelsey Nelson wrote about NCUA’s first three rounds of its Deregulation Project . On January 27th, NCUA announced the fourth round of deregulation with four proposed rules. Here are those proposed rules.
Section 701.32 deals with payment on shares by public units and nonmembers. This section authorizes federal credit unions to receive funds from public units (the government), nonmember credit unions, and, if the credit union has low-income status, nonmembers. Section 701.32(b) provides limitations on this authority. Section (b)(1) provides a limit on public unit and nonmember shares and (b)(2) requires that the board of directors adopt a written plan if the amount of public unit and nonmember shares exceeds 70% of paid-in and unimpaired capital and surplus.
NCUA’s proposed rule would eliminate section 701.32(b)(2) and the requirement to develop a written plan. The goal of the removal is to allow “credit union boards to manage their funding sources and reliance on these funds with greater flexibility.”
The next proposed rule deals with section 741.5 . Section 741.5 requires federally insured credit unions (FICUs) that provide for supplemental insurance, in addition to that provided by the National Credit Union Share Insurance Fund (NCUSIF), to provide their members with 30-day notice of the termination of the supplemental insurance. The proposed rule would eliminate the 30-day requirement and merely require notice “prior to the effective date of termination.”
This proposed rule would eliminate section 741.2 . Section 741.2 provides for a maximum borrowing authority for federally insured credit unions of 50% of the credit union’s paid-in and unimpaired capital and surplus. The proposed rule would remove section 741.2 in its entirety. State-chartered credit unions would still be subject to applicable state law and federal credit unions would still be subject to the statutory limit on borrowing as provided for in section 701.38 .
The last proposed rule deals exclusively with federally insured, state chartered credit unions (FISCUs). Section 741.10 requires credit unions that are permitted by state law to accept nonmember shares or deposits, to identify such nonmember accounts and notify the nonmember accountholders that their accounts are not insured by the NCUSIF. The proposed rule would eliminate section 741.10 . However, as NCUA notes, the requirement would not be eliminated. According to the preamble, state-chartered credit unions already have to follow the same requirements in order to obtain and maintain federal share insurance. Specifically, NCUA Form 9600 places the requirements on FISCUs “as a condition of maintaining federal share insurance coverage.”
The proposed rule also requests comments on changes that should be made to section 741.9 and its prohibition on FICUs offering member shares that are not eligible for federal share insurance.
For more information on the various NCUA deregulatory proposals, members can review summaries in our regulatory comments here. We would also appreciate any feedback you have on a particular deregulatory proposal, you can find information on submitting feedback in the relevant regulatory comment. America’s Credit Unions will continue to monitor these proposed rules and any further proposals from NCUA. For any questions, please don’t hesitate to email [email protected].
