2 Final Rules: CUSO Activities and CAMEL Adds 'S' Component

Board room

The National Credit Union Administration (NCUA) Board adopted the following two final rules on Thursday during its monthly October meeting:

  • Credit Union Service Organizations (Part 712): Currently, CUSOs are generally limited to business lending, consumer mortgage lending, student lending, and credit cards. This final rule will amend the NCUA’s regulation regarding CUSOs with the objectives to: 1) expand the list of permissible activities and services for CUSOs to include originating any type of loan that a federal credit union may originate; and 2) grant the board additional flexibility to approve permissible activities and services outside of notice-and-comment rulemaking.
  • The board vote was 2-1, with NCUA Board Chairman Todd Harper dissenting. The final rule will become effective 30 days after the date of publication in the Federal Register.
  • CAMELS Rating System (Parts 700, 701, 703, 704 and 713): The final rule will add the “S” (Sensitivity to Market Risk) component to the existing CAMEL rating system (Capital, Asset Quality, Management, Earnings, Liquidity and Asset-Liability Management). Also, the rule will redefine the “L” (Liquidity Risk) component. The existing CAMEL rating process addresses both sensitivity to market risk and liquidity risk within the “L” component.
  • Also, the amendment will enhance consistency between the regulation and supervision of credit unions and other financial institutions. The proposed effective date of the final rule is April 1, 2022. NCUA examiners will begin assigning the “S” component rating for examinations and supervision contacts starting on or after April 1, 2022.

Cybersecurity Briefing
The board also received a briefing on cybersecurity, which covered topics on cybersecurity threat updates, the Information Security Examination Program, guidance and risk alerts, the NCUA’s cybersecurity resources webpage, and industry outreach and partner engagement. 

Emergency Capital Investment Program (ECIP) Guidance
Lastly, the board discussed the issuance of yesterday’s NCUA letter to credit unions pertaining to low-income credit unions (LICU) participating in the U.S. Treasury Department's Emergency Capital Investment Program (ECIP). The guidance indicates eligible low-income credit unions may accept 30-year subordinated debt investments from the Treasury’s ECIP.

Low-income credit unions may also treat this ECIP funding as secondary capital in accordance with the NCUA’s regulations, provided any low-income credit union receiving secondary capital treatment has an NCUA-approved secondary capital plan by Dec. 31, 2021.

Yesterday’s announcement is part of a three-step process the NCUA is taking to ensure credit unions have full access to the Treasury Department program.

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