During its February meeting, the National Credit Union Administration Board approved by notation vote a temporary order that specifies temporary revisions to the earnings-retention requirement for credit unions that are adequately capitalized. This temporary order is effective from April 1, 2022, through and including March 31, 2023.
As part of this interim final rule, the NCUA Board extended the time-limited regulatory provision that the Board re-adopted in an April 2021 interim final rule. The Board determined that decreasing the earnings-retention requirements set forth in the NCUA’s regulations is necessary to avoid a significant redemption of shares and would further the purposes of the prompt corrective action regulations.
Specifically, the interim final rule makes two temporary changes to the NCUA’s prompt corrective action regulations. The first temporarily reduces the earnings retention requirement for federally insured credit unions classified as adequately capitalized.
Those credit unions unable to meet the earnings retention requirement will not have to submit a written application requesting approval to decrease their earnings retention amount. However, if a credit union either 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 second change temporarily permits an undercapitalized credit union to submit a streamlined net worth restoration plan if it becomes undercapitalized predominantly because of share growth. If a credit union becomes less than adequately capitalized for reasons other than share growth, it must still submit a net worth restoration plan under the current requirements in NCUA’s regulations.
Notwithstanding this order, the appropriate Regional Director is authorized to require any individual federally insured credit union to submit an earnings transfer waiver if the credit union poses an undue risk to the Share Insurance Fund or exhibits material safety and soundness concerns.