NCUA September Board Meeting Recap

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In addition to approving changes to its real estate appraisal rule during the September board meeting, the National Credit Union Administration (NCUA) Board received a briefing on the Share Insurance Fund Quarterly Report.

The report showed a net income of $20.5 million and $17.7 billion in assets for the second quarter of 2020. The fund also reported $72.1 million in total income for the second quarter of 2020. The fund’s equity ratio declined to 1.22 percent as of June 30, which is below the board-approved normal operating level of 1.38 percent. The primary driver of the decline was the rapid growth in insured shares, which increased nearly 13 percent from December 2019.

NCUA staff, in response to a question from NCUA Chairman Rodney Hood, said that no NCUSIF restoration plan was necessary at this time, which is required if the equity ratio drops below 1.2 percent. They also noted that as a result of share growth, many credit unions’ capitalization deposits have dropped below the statutorily required 1 percent of insured shares. Therefore, these credit unions will be invoiced to maintain the 1 percent capitalization deposit. These invoices will amount to $1.5 billion in aggregate. Invoices will be sent out later this week, and deposits will be due in October. Chairman Hood said that vigilance is needed to manage and monitor the situation.

Additionally, the board approved an interagency order granting an exemption from BSA Customer Identification Program (CIP) requirements for certain loans extended to facilitate the financing of property and casualty insurance policies. Premium Financing Arrangements are typically same-day finance arrangements, where CIP requirements can prove a competitive impediment to financial institutions and a burden to offering such financing with immediacy.

In addition, the Financial Crimes Enforcement Network (FinCEN) has already exempted this type of financing arrangement from Customer Due Diligence and Beneficial Owner requirements, concluding that it represents a very low risk of money laundering or terrorist financing. Credit unions engaging in premium finance lending must continue to comply with all other regulatory requirements, including Bank Secrecy Act/Anti-Money Laundering (BSA/AML) regulations that require the filing of suspicious activity reports. The exemption is effective once all of the federal banking agencies approve it.

The board was also briefed on the status of the Enterprise Solution Modernization Program’s first project, known as the Modern Examination and Risk Identification Tool (MERIT). This system will replace the agency’s legacy examination platform that has reached the end of its service life.

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