NCUA Makes Two Temporary Changes to PCA Requirements

The National Credit Union Administration (NCUA) Board on May 21 approved an interim final rule making two temporary changes to its prompt corrective action (PCA) requirements for credit unions that become less than well capitalized..

This interim rule temporarily reduces the earnings retention requirement for credit unions classified as adequately capitalized. For those credit unions that do not meet the earnings retention requirement, they will not have to submit a written application requesting approval to decrease its earnings retention amount. But if a credit union poses an undue risk to the National Credit Union Share Insurance Fund or exhibits material safety and soundness concerns, the appropriate NCUA Regional Director may require the credit union to submit an earnings transfer waiver request.

The interim final rule temporarily permits an undercapitalized credit union to submit a streamlined net worth restoration plan, demonstrating that the reduction in capital was caused predominantly by share growth and that this is a temporary condition because of the pandemic. However, if a credit union becomes less than adequately capitalized for reasons other than share growth, they must still submit a net worth restoration plan under the current requirements in NCUA’s regulations.

The NCUA Board believes that these amendments will provide federally insured credit unions with additional flexibility without jeopardizing the safety and soundness of the credit union system.

The interim final rule will become effective once it is published in the Federal Register.

These temporary changes will be in place until the end of 2020.

Read the interim final rule.