Compliance Blog

Last week, NCUA issued a letter to credit unions outlining its examination priorities for exams that will take place while the current pandemic persists. The agency noted that helping credit unions experiencing significant financial or operational problems will be the priority. To help assess what assistance might be needed, NCUA will be contacting credit unions periodically over the coming months. Below are some financial resources NCUA offers that credit unions might want to ask about when talking with NCUA about their financial and operational status.

Central Liquidity Facility

NAFCU has heard from a significant number of credit unions offering skip a pay, deferrals and other modifications to loan payments. In addition to not receiving the payments and income from these loans, it may also become necessary for credit unions to advance funds to cover related costs, such as insurance or tax payments. Couple this with a decrease in deposits as many members may no longer be receiving regular paychecks and a credit union may find itself experiencing some challenges meeting liquidity needs.

The Central Liquidity Facility (CLF) was created to provide a source of liquidity for credit unions when they experience liquidity shortfalls unexpectedly. Credit unions may borrow funds from the CLF to meet their liquidity needs either directly as a member or indirectly through an agent member.

To qualify for a loan, the CLF rules require the credit union to be creditworthy and demonstrate a liquidity need. Section 725.18(c) provides some characteristics of an uncreditworthy credit union which include insolvency, unsatisfactory practices in extending credit, excessive dependence on borrowed funds and inadequate cash management policies. No one factor is determinative; instead, all the factors will be considered. Under section 725.2(i), there are three options for demonstrating liquidity need: short-term adjustment credit, available for up to 90 days, to meet temporary needs; seasonal credits, available for up to 270 days, to meet unexpected patterns in deposits and loans and protracted adjustment credits, which vary in maturity, to meet longer-term needs due to unusual or emergency circumstances. Qualified credit unions can request a loan in any amount. NCUA has indicated it is working on streamlining access to the CLF.

Urgent Needs Grants

Federally insured, low-income designated credit unions (LICUs) have access to other grant and loan programs NCUA offers. Under section 701.34, a credit union qualifies as a LICU if a majority of its members are low income members. Low-income members are those whose income is 80% or less than either the median family or individual income, as applicable, for the metropolitan area where they live or the national metropolitan area, whichever is greater. NCUA’s Low-Income Designation webpage provides more resources and information.

NCUA has announced that urgent needs grants, up to $7,500, are now available for LICUs affected by COVID-19. These funds can be used for equipment to remotely provide financial products and services, consulting services to develop programs to assist small businesses or schools and materials informing members about share insurance coverage. LICUs are also eligible for loans through the Community Development Revolving Loan Fund. LICUs can apply for grants and loans through the NCUA’s CyberGrants portal.

COVID-19 Emergency Response Fund

Last week, the NCUA also announced the availability of funds through the COVID-19 Emergency Response Fund. The Fund, administered by NCUA’s Office of Credit Union Resources and Expansion, is designed to help LICUs provide needed support in their communities. Funds can be used for: offering loan payment relief programs; paying for remote working costs; developing new services for affected members; helping schools, such as by providing breakfast or lunch; helping elderly members, such as with food or medication delivery and providing rental or utility payment assistance to small business owners or hospitality and service employees.

No interest loans are available in amounts up to $250,000 with a three-year maturity. Full or partial prepayment can be made during the loan term. Grants, up to $10,000, will be awarded on a first-come first-served basis. However, minority depository institutions and credit unions with less than $100 million in assets will have priority. LICUs can apply through May 22 via the NCUA’s CyberGrants portal.

More on Stimulus Payments. If you missed Monday’s Ask the Fed webinar covering the latest information on the stimulus payments, fear not! More information on the payments can be found on this IRS webpage and this Federal Reserve Board Services webpage. NAFCU members can also find a summary of the information, including operational and processing considerations, in the Compliance, Risk & BSA Network post – Processing CARES Act Stimulus Payments for Your Members.