Regulatory Final Rule Analysis: NCUA RegFlex Program Changes

CUNA
November 16, 2010 | COMMENTS

The NCUA Board has adopted a final rule that amends the Regulatory Flexibility (RegFlex) Program by rescinding the RegFlex exemptions that pertain to federal credit union (FCU) involvement in fixed assets, member business loans (MBLs), and stress testing and discretionary control of investments. These changes were adopted despite concerns raised by CUNA and others that the data and examples NCUA cited as support for rescinding the exemptions were insufficient and that the few extreme cases highlighted by NCUA do not represent a system-wide problem.

In regard to MBLs, the final rule subjects RegFlex participants to the collateral and security provisions of the MBL rule that require the personal liability and guarantee of the borrower’s principals. Further, the rule requires RegFlex participants to comply with the general limitation on an FCU’s investment in fixed assets to no more than 5% of its shares and retained earnings. Additionally, the final rule requires RegFlex FCUs to stress test their investments in certain instances. Lastly, when delegating discretionary control over investments, the final rule places on RegFlex FCUs the same 100% net worth limitation applicable to non-RegFlex FCUs.

The final rule is effective as of November 29, 2010.

Click here for CUNA's Final Rule Analysis.