Succession Planning, Sup. Priorities, & CLF Enhanced Authority

Board room

The National Credit Union Administration (NCUA) board held its first open meeting of 2022 and approved a proposed rule on succession planning. Additionally, the NCUA board was briefed on the agency's 2022 supervisory priorities and the status of the Central Liquidity Facility (CLF) following the statutory expiration of its enhanced authority.  Here are key takeaways:

Proposed Rule: Succession Planning (Part 701)
This proposed rule would require federal credit union (FCU) board of directors to establish and adhere to processes for succession planning. The succession plan will help to ensure that the credit union has plans to fill key positions, such as officers of the board, management officials, executive committee members, supervisory committee members, and (where provided for in the bylaws) the members of the credit committee to provide continuity of operations. In addition, the proposed rule would require directors to be knowledgeable about the FCU’s succession plan. Although the proposed rule would apply only to FCUs, the board’s purpose is to encourage and strengthen succession planning for all credit unions. The proposed rule would provide FCUs with broad discretion in implementing the proposed regulatory requirements to minimize any burden.

Board Briefing: 2022 Supervisory Priorities
The board received a briefing on the agency’s recently announced supervisory priorities for 2022. Staff walked through the priorities:

  • Credit Risk Management
  • Information Security (Cybersecurity)
  • Payment Systems
  • BSA/AML/Countering Terrorism Financing
  • Capital Adequacy/Risk Based Capital Rule
  • Loan Loss Reserving
  • Consumer Financial Protection
  • Loan Participations
  • Fraud
  • London Inter-Bank Offered Rate (LIBOR) Transition
  • Interest Rate Risk

Staff also provided an update on:

  • NCUA Connect & MERIT
  • Recording of Official Meetings
  • CAMELS Update

Current Expected Credit Losses (CECL)
Chairman Harper also asked staff about material available to help credit unions with CECL implementation. Staff described the resources available on NCUA’s CECL page, and mentioned that credit unions can email NCUA with any specific needs on certain elements of CECL and staff will develop material response to those inquiries. In addition, staff noted that NCUA is working on a spreadsheet regarding the Weighted Average Remaining Maturity (WARM) method for complying with CECL. NCUA plans to share the draft spreadsheet with FASB for its approval, and then hopes to make it available to credit unions by the end of March.

Board Briefing: Central Liquidity Facility (CLF), Expiration of CARES and Consolidated Appropriations Acts Impact
The board received a briefing on how the expiration of CARES Act and Consolidated Appropriations Act provisions impact the CLF.

As a result of the expiration of the statutory provisions:

  • The total amount of funds the CLF has the authority to borrow reverts to a maximum of 12x (from 16x) the subscribed capital stock and surplus of the Facility.
  • The flexibility that permitted an Agent member to purchase capital stock for a subset of its membership expired.
  • The definition of “liquidity needs” in the FCU Act again references those credit unions “primarily serving natural persons.”
  • The flexibility and discretion the NCUA board had to approve advances for CLF members that had made a reasonable effort to first utilize a primary source of funding expired.

During the briefing, staff described the board’s effort to seek permanent CLF reform, including:

  • Increasing maximum borrowing authority;
  • Corporate credit union agent member borrowing authority;
  • Flexibility in agent member group composition; and
  • Clarifying language on board credit granting authority.

The California and Nevada Credit Union Leagues also support making these CLF enhancements permanent.

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