One day after the Federal Reserve slashed interest rates for a second time in less than a month due to the coronavirus, credit union groups are calling on lawmakers to enact reforms to help the industry deal with the fallout from the pandemic.
The Fed on Sunday cut the federal funds rate, moving rates toward 0%, the lowest the index has seen since the 2008 financial crisis. The primary credit rate was also lowered 150 points, which encourages financial institutions to lend through the discount window.
Jim Nussle, president and CEO of the Credit Union National Association, on Monday called for Congress to double the Community Development Revolving Loan Fund from $1.5 million to $3 million and to increase funding for the Community Development Financial Institutions Fund. Those monies are available to the 320 credit unions certified as Community Development Financial Institutions. Nussle said an emergency infusion of funding would assist institutions serving members and businesses that may soon see the effects of business closures and reductions in spending as the U.S. embraces social distancing to combat the outbreak.
“This has put some stress on the system,” Nussle said during a press call Monday, adding that “rules need to be changed [and] regulations need adjustments.”
The National Association of Federally-Insured Credit Unions has also written to regulators to request relief and sent recommendations on how CUs’ burdens can be eased. NAFCU President and CEO Dan Berger called on the National Credit Union Administration to provide compliance relief for the industry, as well as requesting virtual meetings and flexibility for credit unions to reschedule annual meetings in order to protect members and staff.
One immediate change the industry will see will take place Thursday when the NCUA’s monthly board meeting takes place. While the regulator regularly holds both an open board meeting and a closed meeting, this week will only include a closed meeting. NCUA did not respond to inquiries last week as to whether the measure was related to the coronavirus.
The agenda for Thursday’s meeting includes supervisory and personnel matters. Some have speculated the board could also discuss guidance on how credit unions should operate during the current crisis.
For now, industry groups have suggested the economy could be in for a long slog.
"In the near term, NAFCU expects a sharp slowdown to the economy in the second and third quarters, at a minimum,” NAFCU Chief Economist Curt Long wrote Friday. “Recession is a distinct possibility.”
