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Climate RFI Issued, Rate Ceiling Brief, & Cybersecurity

During this week’s National Credit Union Administration (NCUA) monthly meeting, the board issued a request for comment (RFI) on climate-related financial risk and received separate briefings on the federal credit union loan interest rate ceiling and cybersecurity issues.

Request For Information (RFI) on Climate-Related Financial Risk
In a 2-1 vote, with NCUA Board Vice Chairman Kyle Hauptman dissenting, the board issued a request for comment (RFI) on climate-related financial risk. Specifically, the NCUA is seeking input on “current and future climate and natural disaster risks to federally insured credit unions, related entities, their members, and the National Credit Union Share Insurance Fund.”

The board stressed that the RFI, which consists of 38 questions, will not be used in the examination or supervision of individual credit unions, and that that any new requirements related to climate-related financial risk would require regulatory changes.

Ahead of Thursday’s meeting, the NCUA’s Office of the Chief Economist released a research note showing roughly one-quarter of federally insured credit unions are located in communities that have a high risk of experiencing negative effects due to natural hazards, representing 34 percent of systemwide assets. In addition, minority depository institutions face a substantially higher risk than the credit union system in aggregate. Moreover, credit unions most at risk of negative outcomes due to natural hazards tend to be located in coastal areas, particularly in California, Texas, and Florida. Together, these three states account for 11 percent of credit unions located in communities with an elevated risk and 22 percent of credit union assets.

The California and Nevada Credit Union Leagues will post a summary of the RFI for your review and opportunity to comment.  The comment period will be open for 60 days after publication in the Federal Register.

Board Briefing on FCU Loan Interest Rate Ceiling
The board received a briefing from staff on the federal credit union loan interest rate ceiling. The briefing mainly focused on the risks associated with decreasing the current (18 percent) rate back to 15 percent; however, NCUA staff indicated that it is “reasonable to interpret the Federal Credit Union Act (FCU Act) to permit a floating interest rate ceiling.”

Though no action was slated for during the meeting, the board discussed several concerns with a floating cap, such as the cost to members as well as logistical challenges in doing so.

During the Leagues’ meetings and visits at the 2023 Governmental Affairs Conference (GAC) in Washington, D.C. earlier this year, credit union and League leaders urged the NCUA to make considerations regarding the federal loan interest rate ceiling, particularly during conversations with NCUA Board Chairman Todd Harper. The Leagues requested NCUA to consider increasing the fixed-rate cap or adopting a floating-rate cap, asking the agency to be mindful of the current interest rate environment — particularly the Federal Reserve’s recent and continuing rate hikes — when reviewing the ceiling.

Board Briefing on Cybersecurity Update
The board also received a cybersecurity update from NCUA staff.

Report: Climate Risks for FCUs
Additionally, a report on natural-hazard risk for federally insured credit unions was released this week by NCUA staff.

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