The NCUA has gone back to the drawing board and reissued a revised proposal concerning federal credit unions’ ownership of fixed assets. The proposed rule issued in 2014 drew mostly negative comments stating that it didn’t go far enough in providing credit unions with authority to manage their own resources. This renovated proposal represents a significant improvement over the previous proposal by eliminating altogether the 5% cap on fixed assets.
The proposed changes to the current fixed assets rule are as follows:
The 5% Removal
Elimination of the 5% aggregate limit on investments in fixed assets for federal credit unions with $1,000,000 or more in assets. NCUA proposes to oversee an FCU’s ownership of fixed assets through the supervisory and examination process rather than by setting an artificial limit. Accordingly, the current provisions dealing with waivers to the 5% limit would be deleted and any existing waivers would be considered moot as of the effective date of a final rule.
Property to by Occupied
FCUs are authorized to purchase fixed assets that are necessary or incidental to their operations. As a result, there will continue to be a requirement that purchases of real estate be done with the intent that the property be fully occupied at some future date. That being said, NCUA is not proposing to change the current rule, which does not set a specific time frame for full occupancy.
The proposed rule would require, however, that an FCU partially occupy improved or unimproved property within six years. This is a significant improvement over the current rule, which requires partial occupancy within 30 months unless a waiver from NCUA has been approved. Under this proposed rule, FCUs would still be able to apply for a waiver if they need more than six years to partially occupy the property.
The name of the rule would change from “Federal credit union ownership of fixed assets” to “Federal credit union occupancy, planning and disposal of acquired and abandoned premises.”
Full-text of the proposed rule
Jane Pannier is senior vice president and in-house counsel for AffirmX LLC, a developer of an innovative remote compliance review solution. Ms. Pannier is also SVP of AdvisX, a CUSO that specializes in using technology to more effectively deliver consulting services to financial institutions.