NCUA Vice Chairman Kyle S. Hauptman
As Prepared for Delivery on February 17, 2022
Thank you, Kelly, Kathryn, and Marvin, for your presentation.
Two years ago, few would have predicted we would now be going into year three of the pandemic. That said, I’d like to make clear that this should be the last time we renew this policy. Barring something very unexpected, this policy should expire in March 2023. Temporary policies that keep getting renewed aren’t temporary. I’m reminded of the rent control policies that still exist in New York City, first enacted as an emergency measure in World War II.
These two temporary changes to prompt corrective action (PCA) regulations mirror what was done in 2020 and 2021. One amends the regulations to waive the earnings retention requirement for any federally insured credit union that is classified as adequately capitalized. The second modifies the documentation required for net worth restoration plans. The changes address pandemic-related factors affecting both the Share Insurance Fund and the net worth of many credit unions.
Share growth remains unusually high compared to pre-pandemic levels. Specifically, share growth in the year ending September 30, 2021, exceeded 14 percent. The impact to net worth is not due to risky lending or investments. In fact, if NCUA did not provide net worth flexibility, it would have resulted in greater statutory pressure to increase yields on loans and investments to increase retained earnings and meet regulatory requirements. Pressure to reverse net worth ratio trends by reaching for yield during this unprecedented period could be counterproductive.
Streamlining the net worth restoration plan process benefits both affected credit unions and the NCUA by reducing paperwork. It does not mean the plans aren’t reviewed closely. The Regional Directors have the authority and discretion to work with credit unions if needed. Unfortunately, it is still not ‘business as usual,’ and I urge credit unions to work with the Regions if they feel the need. In general, I support keeping these kinds of decisions in the Regions, where staff are closer to the day-to-day challenges faced by credit unions.
- How many credit unions are affected by this PCA relief and what percentage have had positive earnings? What does that tell us about the prospect that this should be the last time we renew this policy?
- Are credit unions still required to submit a request for an earnings retention requirement waiver?
- During the pandemic how many credit unions were allowed to file streamlined net worth restoration plans due to share growth only? How many were actually requested? How many were denied?
Thank you. Mr. Chairman, this concludes my remarks.