Prompt Corrective Action (PCA)

Has NCUA issued further clarification on changes to PCA in response to COVID-19?

Yes. Last month, the NCUA Board approved additional regulatory relief measures related to the NCUA’s prompt corrective action (PCA) regulations anticipating that some credit unions may experience a temporary reduction in earnings and capital due to their COVID-19 response efforts. The interim final rule provides relief to federally insured credit unions during the COVID-19 pandemic, while still maintaining the safety and soundness of the credit union system. NCUA Letter to Federally Insured Credit Unions 20-CU-18 (6/9/20) discusses the administrative order approved pursuant to § 702.201 that reduces the amount of earnings retention required for credit unions classified as adequately capitalized. Additionally, the letter discusses credit unions’ authority to submit a streamlined net worth restoration plan (NWRP) if their net worth ratio declined to undercapitalized predominantly due to temporary share growth during the COVID-19 pandemic.

Has the NCUA made any changes to its Prompt Corrective Action (PCA) Rule?

Yes. At the NCUA board meeting on May 21, 2020, the NCUA Board issued an interim final rule (IFR) regarding PCA. The IFR makes two temporary changes to the PCA regulations to help ensure federally-insured credit unions (FICUs) remain operational and liquid during the COVID-19 crisis. First, the IFR amends §702.201 to temporarily waive the earnings retention requirement for any credit union that is adequately capitalized; second, the IFR modifies and simplifies §702.206(c) with respect to net worth restoration plans for FICUs who fall to undercapitalized because of share growth. These temporary modifications will be in place until Dec. 31, 2020.