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.