NCUA Approves Final Rule to Ease CU Efforts to Work With Fintechs

Agency says aim is to clarify current regulations, increase flexibility for credit unions.

David Baumann


Sep 22



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David Baumann

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David Baumann

A squiggly pink arrow pointing downward and to the right.
The NCUA board room.

The NCUA board on Thursday approved a final rule intended to make it easier for federally insured credit unions to take advantage of advanced technology offered by the fintech industry.

The board unanimously approved the rule, which changes the agency’s regulations governing indirect lending, the purchase of loan participations and the purchase, sale and pledge of eligible obligations and notes of liquidating credit unions.

What They're Saying

“The goal of the final rule is to clarify the NCUA’s current regulations and provide additional flexibility, making it easier for federally insured credit unions to take advantage of advanced technologies and opportunities offered by the financial technology sector,” agency officials said, in a memo explaining the rule.

Agency officials said the NCUA also is attempting to shift to a more principles-based approach toward loan participations and eligible obligations. That shift includes removing prescriptive limits and replacing them with risk-focused, principles-based requirements.

“This final rule allows credit unions to capitalize on the benefits and opportunities provided by fintech firms,” NCUA Chairman Todd Harper said.

“It should go without saying that we do not want fintechs—or any service provider—to choose NOT to work with credit unions because their regulator makes it unnecessarily difficult,” board Vice Chairman Kyle Hauptman added. 

Board member Rodney Hood said that credit unions must adapt to the use of advanced technology in the banking system.

“Fintech is no longer a luxury but a strategic imperative for credit unions to remain relevant, attract younger generations of members, and promote financial inclusion,” Hood said.

Equity Ratio Update

In other business, agency CFO Eugene Schied said that the agency’s equity ratio at the end of June stood at 1.27%, below the 1.33% normal operating level set by the board. He said agency officials estimate that the equity ratio will remain at 1.27% at the end of 2023.

He told the board that based on the CAMELS rating system, 134 credit unions are classified as troubled—up from 127 during the first quarter of the year. He said the majority of those credit unions have assets of less than $100 million.

Harper said he was not alarmed by the current equity ratio.

“This places the equity ratio squarely between the Share Insurance Fund’s statutory floor and the Board’s normal operating level target,” he said. “That’s a fairly good place for the equity ratio to be.”

However, board members also said that NCUA officials are seeing increased levels of interest rate and liquidity risk.

“These risks are playing out in rising delinquency rates for various loan types, including auto loans and credit cards, that are reflected in the latest publicly available call report data,” Harper said.


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