CUNA encourages Congress to enact legislation that provides flexibility to NCUA to offer forbearance from prompt corrective action to otherwise healthy credit unions impacted by federally declared emergencies or disasters, it wrote to a House Financial Services subcommittee.
The pandemic caused lending to slow and deposits to increase, particularly after economic impact payments were made.
“Deposits are a liability on the books of credit unions which means an increase in deposits puts downward pressure on capital ratios. Lower capital ratios draw supervisory scrutiny,” CUNA’s letter reads. “As a credit union approaches the 7% statutory benchmark to be considered well-capitalized, it must take action to slow the decline—perhaps by disincentivizing deposits—because if the credit union falls below 6%, it must develop a net worth restoration plan per the Federal Credit Union Act.”
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