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From Credit Union Times – The NCUA board Thursday approved decreasing the agency’s Normal Operating Level from 1.39% to 1.38%–far less than credit union trade groups have been pushing for during the past year.
Board Chairman J. Mark McWatters said that the agency made a commitment to reviewing the Normal Operating Level on an annual basis.
Credit union trade group officials said they were pleased with the decrease, even though the level remains higher than the 1.3% they had been pushing for this year.
“This decrease is a positive development and we thank the NCUA for taking this step,” said NAFCU Chief Economist and Vice President of Research Curt Long. “We will continue to press the NCUA to reduce the NOL for further distributions.”
“We strongly supported NCUA issuing share insurance fund distributions with the expectation that a rise in the NOL was temporary,” said CUNA Chief Advocacy Officer Ryan Donovan. “We’re encouraged that NCUA is honoring its commitment to review the NOL each year and look forward to the possibility of an additional dividend, depending on NCUA’s analysis.”
The decision to review the normal operating level was added to the meeting’s agenda at the last minute, because agency staff just recently completed the work needed for the decrease, said Larry Fazio, director of the NCUA’s Office of Examination and Insurance.
Fazio said that under federal law, the operating level must be at least 1.20% and cannot exceed 1.50%.
The agency’s policy is to set the operating level at a figure that would allow the agency to withstand a moderate recession.
If the operating level exceeds the level the board sets, federal credit unions may receive a dividend.
The board approved increasing the operating level from 1.30% to 1.39% last year, at the same time it approved merging the Corporate Stabilization Fund with the Share Insurance Fund.
At the time, credit unions said that increase was excessive.
However, at the time, agency Inspector General James Hagen said the agency’s methodology used to justify the increase was reasonable.
Last month, the board was told that the Share Insurance Fund’s reserves had dropped $744.9 million as a result of the failure of two credit unions—Melrose Credit Union and LOMTO Federal Credit Union.
The agency was forced to assume control of hundreds of millions of dollars in loans backed by taxi medallions whose value has dropped in recent years.
The board said at the time, that the Share Insurance Fund was able to absorb the loss.
At Thursday’s meeting, the board also received the final report of its Regulatory Reform Task Force. The board created the task force in response to President Trump’s call for all agencies decrease their regulatory burden.
NCUA officials emphasized that they were not required to follow that Executive Order since it is an independent agency but chose to do so anyway.
As part of the review, the task force documented changes the agency made this year and revised what rules it believes should be amended in the near future.
“Just because we propose something doesn’t mean this board or any future board will adopt [it],” NCUA General Counsel Michael McKenna said at Thursday’s meeting.
The task force recommended that the board should place a higher priority on deciding whether to issue a proposed rule on alternative capital federally insured credit unions may use in meeting capital standards.
The group also recommended examining CUSO regulations.
NASCUS President/CEO Lucy Ito said she was pleased that the agency is attempting to ease the regulatory burden she said credit unions face. However, she renewed her call for the agency to combine all insurance-related rules into one section of the agency’s regulations.
“By consolidating insurance rules, NCUA could provide substantial regulatory relief to federally insured state-chartered credit unions in a manner consistent with its regulatory reform efforts to co-locate and combine other rules such as loan maturity and single borrower provisions,” she said.
During the meeting, the board also received a briefing on Blockchain and Distributed Ledge Technology and approved technical changes to agency rules.