Harper: NCUA Still Working on Provisional Charter Plan

Agency chairman also touches on field of membership, consumer protection, Central Liquidity Facility at NAFCU’s Congressional Conference.

David Baumann


Sep 13



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David Baumann

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David Baumann

A squiggly pink arrow pointing downward and to the right.
NCUA Chairman Todd Harper.

The NCUA board will continue to try and focus for the rest of the year on ways to make it easier for groups to form credit unions, NCUA Chairman Todd Harper said Tuesday.

Speaking at NAFCU’s Congressional Caucus, Harper explained that before the end of the year, he expects the board to release a plan to create provisional charters for organizations.

The plan, which members of the agency board have discussed for several months, would be designed to solve a “chicken and egg” problem. Currently, organizations often need to have capital to obtain a charter, while at the same time needing the charter to raise the capital.

Harper also reiterated his desire for the credit union industry to form an institution similar to the FDIC’s Mission-Driven Bank Fund that pools capital to make it easier for new financial institutions to be established.

What Else Did Harper Cover?

The NCUA chairman said the agency is exploring ways to allow federal credit unions to expand their fields of membership but was not more specific.

Harper also mentioned that he still wants to increase the NCUA’s focus on consumer protection issues, adding that the agency is the only banking regulator that does not conduct separate consumer examinations.

Further, he revealed his concern that, based on the agency’s recently released second quarter report, there is a heightened level of interest rate risk.

“The high levels of interest rate risk we are seeing can also increase a credit union’s liquidity risks, contribute to asset quality deterioration and capital erosion, and put pressure on earnings,” Harper said. “Other timely issues, including the reinstatement of federal student loan repayments and rising costs for property and casualty insurance, will also have an impact on already strained household finances.”

With rising household financial strain, he continued, credit unions must carefully manage their credit risks and “consider early intervention to prevent a delinquency from becoming a charge-off.”

Additionally, Harper once more implored Congress to restore pandemic-related changes that he said assisted the NCUA Central Liquidity Facility in operating more efficiently. And he added that the NCUA board still wants Congress to provide the NCUA with power to examine third-party servicers—something that CUNA and NAFCU oppose, contending it would require an increase to the agency’s budget.

Increase in Loan Delinquencies

Earlier Tuesday, NCUA board member Rodney Hood told those attending the NAFCU conference that agency officials are seeing an “uptick” in loan delinquencies, adding that credit unions must keep an eye on their loan underwriting.

And he noted that if credit unions find themselves facing liquidity risks, “we have a plethora of tools you can use.”

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