FCU Member Expulsion, Subordinated Debt, & SIF Update

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The National Credit Union Administration (NCUA) Board met for its September board meeting this week, the first in-person open board meeting since the COVID-19 pandemic began.

Here are key takeaways for credit unions:

Proposed Rule: FCU Bylaws & Member Expulsion (Part 701, Appendix A)
The board issued a proposed rule that would amend the standard federal credit union (FCU) bylaws to adopt a policy by which a FCU member may be expelled for cause by a two-thirds vote of a quorum of the FCU’s board of directors. Currently, a credit union could expel a credit union member in two ways: by a two-thirds vote of the membership present at a special meeting called for that purpose, and for non-participation in the affairs of the credit union as specified in a policy adopted and enforced by the board.

Under the Credit Union Governance Modernization Act of 2022, enacted by Congress on March 15, 2022, the NCUA has until Sept. 15, 2023 to develop a final rule that FCUs may adopt to expel a member for cause.

Proposed Rule: Subordinated Debt (Part 702)
The board issued a proposed rule that would amend the subordinated debt rule, which became effective Jan. 1, 2022. The proposed change to extend the regulatory capital treatment of grandfathered secondary capital (GSC) would benefit eligible low-income credit unions participating in the U.S. Department of the Treasury’s Emergency Capital Investment Program or in other programs administered by the federal government.

Board Briefing: Share Insurance Fund Quarterly Report
The board also received a report on the National Credit Union Share Insurance Fund (NCUSIF), which showed the fund's net income of $19.2 million and a net position of $20.3 billion for the second quarter ending June 30, 2022. The fund’s total assets decreased to $20.3 billion at the end of the quarter from $20.6 billion at the end of the first quarter of 2022.

The equity ratio at the end of the second quarter of 2022 stood at 1.26 percent. The quarterly report included an equity ratio projection. For the period ending Dec. 31, 2022, NCUA staff projects the equity ratio for the Share Insurance Fund will be 1.30 percent.

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