Interest Rate Change, Subordinated Debt on NCUA Spring Regulatory Agenda

The National Credit Union Administration board will explore the possibility of changing the maximum interest rate that credit unions may charge, the agency said Tuesday in an updated regulatory agenda.

That interest rate stands at 18% for most loans. The agency said it intends to study the impact that rate has on credit unions and the methodology that the NCUA could use to set a temporary interest rate ceiling, including a variable or floating rate.

The regulatory plans for federal agencies are compiled by the Office of Management and Budget and published in the “Unified Agenda of Regulatory and Deregulatory Action.”

The NCUA said in the agenda that it intends to issue the advanced notice of proposed rulemaking in September but noted that date is an estimate.

In the agenda, the NCUA also reported that, among other things, it plans to:

  • Amend its regulations to allow low-income credit unions, complex credit unions and new credit unions to issue subordinated debt for the purposes of regulatory capital treatment. The target date is listed as June 2020, but the agency board did not consider such a plan during its June meeting.
  • Amend its investment rule, sections of which the agency said are “overly restrictive and unnecessary from a safety and soundness perspective.” The target date for that rule is January 2021.
  • Propose an analog to integrate the community bank leverage ratio into the NCUA’s capital standards. In November 2019, the other banking regulators issued a final rule providing qualifying community banks the option of using a simplified leverage measure for capital adequacy. The agenda stated that the NCUA board has determined that it is appropriate for credit unions to be offered the same option. The target date for that proposal was June, but the board did not consider the plan at its June meeting.
  • Consider revising its rule regarding federally insured credit union golden parachute payments. “The proposed rule would improve the organization and clarity of the regulation and would include a section on merger-related financial arrangements,” the agency said. “The proposal also would amend the regulation to assist FICUs in the identification and processing of golden parachute payments.” The target date for a proposed rule is April 2021.

Related:

NCUA Agency Rule List, Spring 2020 in the OMB’s Unified Agenda of Regulatory and Deregulatory Action

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