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Federal Register / Vol. 86, No. 54 / Tuesday, March 23, 2021 / Rules and Regulations
supervision.4 Complying with these new or more stringent regulatory standards would impose additional transition and compliance costs on such FICUs that otherwise may not have become subject to these requirements at this time. This interim final rule gives affected FICUs more time to either reduce their balance sheets, or to prepare for higher regulatory standards.
Additionally, the Board does not believe that the balance sheet growth related to the COVID19 Pandemic has significantly increased the general risk profile of the affected FICUs. As discussed previously, FICUs growth is largely due to the extraordinary growth in insured shares held by FICUs.
Therefore, the Board feels it prudent to offer FICUs relief with respect to certain regulatory requirements being triggered by the unprecedented balance sheet growth.
On December 2, 2020, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and Board of Governors of the Federal Reserve System published a related interim final rule to mitigate temporary transition costs on banking organizations with under $10 billion in total assets as of December 31, 2019, related to the COVID19 Pandemic.5
II. Legal Authority The Board is issuing this interim final rule pursuant to its authority under the Federal Credit Union Act FCU Act.6
Under the FCU Act, the NCUA is the chartering and supervisory authority for Federal credit unions FCUs and the federal supervisory authority for FICUs.
The FCU Act grants the NCUA a broad mandate to issue regulations governing both FCUs and FICUs. Section 120 of the FCU Act is a general grant of regulatory authority and authorizes the Board to prescribe regulations for the administration of the FCU Act.7 Section 209 of the FCU Act is a plenary grant of regulatory authority to the NCUA to issue regulations necessary or appropriate to carry out its role as share insurer for all FICUs.8 Accordingly, the FCU Act grants the Board broad rulemaking authority to ensure that the credit union industry and the National Credit Union Share Insurance Fund remain safe and sound.
4 Based on data as of December 31, 2020, there are eight FICUs that crossed asset-based threshold in part 702, Subpart E.
5 85 FR 77345 Dec. 2, 2020.
6 12 U.S.C. 1751 et seq.
7 12 U.S.C. 1766a.
8 12 U.S.C. 1789.

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III. The Interim Final Rule A. Measurement Date for the Applicability of Capital Planning and Stress Testing Requirements and Office of National Examinations and Supervision Oversight Part 702, subpart E, of the NCUAs regulations part 702 contains assetbased thresholds that determine whether a FICU is required to comply with capital planning and stress testing requirements.9 The asset-based thresholds are meant to ensure that the regulatory requirements applicable to a FICU are appropriate, given the FICUs asset size and, in some cases, the potential risk that the credit union poses to the National Credit Union Share Insurance Fund.
As discussed previously, many FICUs have experienced an unexpected and sharp increase in their balance sheets since the beginning of the COVID19
Pandemic. This unexpected and rapid growth has caused the assets of certain FICUs to rise above asset-based thresholds in part 702 and may cause other FICUs to do so soon. In addition, much of this growth is the result of actions taken by monetary and fiscal authorities, and by individual members in response to the COVID19 Pandemic and generally does not reflect any immediate change in the organizations longer-term risk profile.
In the absence of regulatory change, FICUs that experience an increase in assets above one or more thresholds in part 702 would face additional transition costs necessary to comply with the new or more stringent regulatory standards they have not accounted for in 2021 strategic financial plans and budgets. Given the rapid and unexpected nature of FICU asset growth in 2020, many FICUs are unlikely to have planned for these transition costs.
Therefore, the Board believes it is appropriate to provide temporary regulatory relief to FICUs that have risen above, or will rise above, the asset-based thresholds in part 702. The relief should permit a covered FICU to either delay for one year transition costs that it would otherwise be subject to immediately, to comply with the new standards or an additional year to reduce its total assets to below the applicable asset-based threshold. In order to provide this relief, the Board is issuing this interim final rule to temporarily change the date as of when a FICU measures its assets for the purpose of the capital planning and stress testing requirement.
9 12

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CFR part 702, subpart E.

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Part 702 applies capital planning and stress testing requirements to covered credit unions. A FICU is defined as a covered credit union, and subject to capital planning and stress testing requirements, if it has $10 billion or more in total assets.10 Covered credit unions are then further divided into three tiers and varying levels of regulatory requirements are imposed based on those asset tiers. The tiers ensure capital planning and stress testing requirements are tailored to reflect the size, complexity, and financial condition of the subject credit union. For example, tier I credit unions are not subject to stress testing requirements, however tier II and tier III
credit unions are subject to stress testing requirements. Under part 702:
A tier I credit union is a covered credit union that has less than $15
billion in total assets;
A tier II credit union is a covered credit union that has $15 billion or more in total assets, but less than $20 billion in total assets, or is otherwise designated as a tier II credit union by the NCUA; and A tier III credit union is a covered credit union that has $20 billion or more in total assets, or is otherwise designated as a tier III credit union by the NCUA.
Part 702 applies the asset thresholds for each tier based on a FICUs asset size on March 31 each year measurement date. Under the current rule, if a FICU
crosses any of the tier I, II, or III asset thresholds on March 31, then the FICUs new classification is effective on January 1 of the next year. Accordingly, a FICUs calendar year 2021 capital planning and stress testing requirements were determined by its total assets as of March 31, 2020 and were effective January 1, 2021. If a FICU had $10
billion or more in total assets as of March 31, 2020, it must complete a capital plan in calendar year 2021. And, if a covered credit union had $15 billion in assets on March 31, 2020, it must conduct a stress test in calendar year 2021.
As discussed previously, the interim final rule temporarily amends the measurement date used to determine whether a FICU crosses any of the tier I, II, or III asset thresholds for capital planning and stress testing requirements in calendar year 2022. Under the interim final rule, a FICU will use its assets reported as of March 31, 2020, instead of March 31, 2021, to determine its applicable asset thresholds for 10 See, 12 CFR 702.502. Covered credit unions are defined as a FICU whose assets are $10 billion or more.

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