NCUA's proposed changes to the Catastrophic Act Reporting Regulation.
Samantha: Hello, this is Samantha Shares.
This episode covers N C U A's
proposed changes to the Catastrophic
Act Reporting Regulation.
The following is an audio
version of that document.
This podcast is educational
and is not legal advice.
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And now the proposed regulation.
The N C U A Board is publishing this
proposed rule to amend the requirements
for federally insured credit unions to
report catastrophic acts to the agency.
By providing more time for federally
insured credit unions to notify the agency
of the occurrence of a catastrophic act
and by eliminating the specific list
of items to be documented, the Board
expects the proposed rule to reduce the
compliance burden and allow federally
insured credit unions to focus their
resources on recovery and core functions
without compromising safety and soundness.
Part seven forty eight requires
a federally insured credit union
to notify the appropriate N C U
A Regional Director within five
business days of any catastrophic
act that occurs at its offices.
N C U A regulations define a catastrophic
act as any disaster, natural or otherwise,
resulting in physical destruction or
damage to the credit union or causing an
interruption in vital member services, as
defined in section seven forty nine point
one of this chapter, projected to last
more than two consecutive business days.
The agency adopted this requirement
under federal law requiring the agency
to promulgate rules establishing minimum
safety standards relating to security.
In two thousand seven, N C U A amended
the definition of catastrophic act to
address concerns that relatively minor
events could be construed to trigger the
need to file a report and to clarify the
causal link between a disaster and an
interruption in vital member services.
The Board believed these changes were
consistent with the usual and customary
meaning of the word catastrophe.
The Board also stated that these changes
reinforce its view that the reporting
requirement applies only to a disaster,
as opposed to a circumstance where
physical damage or a business closing
occurs but is not disaster related.
While natural disasters were the
leading concern in the aftermath of
hurricanes Katrina and Rita, the use
of the phrasing any disaster, natural
or otherwise, was meant to illustrate
that other events, such as a power
grid failure or physical attack, could
have a similar impact on access to
member services and vital records.
The Board is proposing to
further ease the reporting burden
with the following amendments.
First, the proposal would amend the
regulation to require that credit
unions notify N C U A rather than
the specific regional director.
This change is intended to modernize the
reporting process and provide greater
operational flexibility for both federally
insured credit unions and the agency.
By designating N C U A as the
recipient, the agency can centralize
and streamline the intake of these
critical reports, ensuring they are
routed efficiently to the appropriate
personnel for response and monitoring.
This change would remove the burden
on a credit union, which may be
operating under emergency conditions,
to identify and direct its report
to a specific regional office.
Second, the proposal would extend
the timeframe for submitting a
catastrophic act report from five
business days to fifteen calendar days.
The Board believes the current five
day deadline may be impractical for
an institution recovering from a
significant operational disruption.
Extending the deadline to fifteen calendar
days provides credit union management
with a more reasonable amount of time
to stabilize operations, assess the
full scope of the damage, and provide
a more accurate report to the agency.
This change acknowledges the significant
operational challenges that follow a
catastrophic act and would allow a credit
union to prioritize recovery efforts
over immediate administrative reporting.
Finally, the Board proposes to remove the
prescriptive list of items that a credit
union should include in its internal
record of a catastrophic act and replace
it with a requirement that a credit union
record the basic facts of the event.
While maintaining a record containing
the basic facts of an event is a prudent
business practice, the Board believes
that specifying the exact contents
of this internal record to the degree
currently required is an unnecessary and
overly prescriptive regulatory burden.
Federally insured credit unions already
maintain records of such events as
part of their own business continuity
and disaster recovery planning.
Removing the list of items would reduce
administrative overhead and allow credit
unions the flexibility to document these
incidents in a manner that best suits
their operational and recordkeeping
policies, while still ensuring a
record is created and maintained.
This change would also make the
regulation clearer by removing
a provision that is phrased as a
suggestion and not a requirement
with the use of the word should.
Commenters are invited to provide
feedback on these proposed changes to the
catastrophic act reporting requirements.
Specifically, the Board seeks feedback
on whether the proposed amendments
appropriately balance the agencyâs
need for timely information with the
operational burdens faced by federally
insured credit unions during a crisis.
The Board is also seeking comment
on whether credit unions should be
permitted to use existing notification
tools, such as the form currently used
to report cybersecurity incidents under
section seven forty eight point one,
paragraph c, to report catastrophic acts.
Commenters are also invited to
address whether the proposed fifteen
calendar day reporting timeframe is
appropriate and whether the removal
of the recordkeeping elements would
provide meaningful burden reduction.
For the reasons stated in the preamble,
the N C U A Board proposes to amend
twelve C F R part seven forty eight.
Each federally insured credit union
will notify N C U A within fifteen
calendar days of any catastrophic
act that occurs at its offices.
A catastrophic act is any disaster,
natural or otherwise, resulting in
physical destruction or damage to the
credit union or causing an interruption
in vital member services projected to last
more than two consecutive business days.
Within a reasonable time after a
catastrophic act occurs, the credit
union shall ensure that a record
of the incident is prepared that
contains the basic facts of the event.
This concludes the document.
If your credit union could use assistance
with your exam, reach out to Mark Treichel
on LinkedIn or at Mark Treichel dot com.
This is Samantha Shares, and
we thank you for listening.
