June 26, 2020

NAFCU calls on NCUA to provide more distributions from NCUSIF

NCUAFollowing the NCUA Board meeting Thursday, during which the board discussed forthcoming distributions to former members of failed corporate credit unions, NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt reiterated NAFCU's call to provide additional distributions to all credit unions from the National Credit Union Share Insurance Fund (NCUSIF).

"Any monies being returned to credit unions is a good thing, but the NCUA’s unilateral legal and policy decisions of the past that have precluded additional distributions to all credit unions, including: (1) merging the share insurance fund (SIF) and stabilization fund in lieu of using their administrative authority to give distributions directly to credit unions; (2) approving a sizable increase in the normal operating level of the SIF coinciding with that merger, which effectively shortchanged additional distributions to insured credit unions by nearly $1 billion at that time; and (3) deciding the agency could not co-mingle the NGN estates," Hunt said.

"These decisions resulted in all credit unions that paid into the stabilization fund to not be made whole. In addition, other credit unions who invested in certain corporates will not receive distributions. NAFCU is calling on the NCUA to look at all means that would make credit unions whole, including future distributions from the SIF."

The discussion on failed corporate credit union distributions was part of an update on NCUA Guaranteed Notes (NGN) program and asset management estate. NCUA Board Member J. Mark McWatters recently wrote an open letter breaking down the distributions.

According to the board briefing, former capital holders of the failed corporate credit unions (U.S. Central, WesCorp, Members United, Southwest, Constitution) are set to see distributions of approximately $2.5 billion. One of those estates, Southwest, will issue an interim distribution next month and is the only estate projected to fully repay capital claimants, but U.S. Central, Members United, and Constitution are all projected to provide distributions in the future as well. WesCorp members are not expected to receive a distribution under any scenario.

NAFCU will continue to advocate for the NCUA to evaluate all available options to make whole those credit unions who paid into the TCUSIF or invested in the corporate credit unions, including additional distributions from the SIF.

Request for Information on Exams

The board also issued a request for information on the agency's examination modernization efforts, specifically by doing more exam work with technology over the next 5-10 years. Its efforts intend to:

  • reduce burden on credit unions and increase agency efficiency by reducing onsite examination time;
  • improve offsite supervision capabilities;
  • provide more consistency and standardization for the examination and supervision process;
  • improve communication between examiners, credit unions, and state supervisory authorities; and
  • explore and evaluate technology utilization and appetite for adoption.

"NAFCU strongly supports an effective, efficient and meaningful examination program," Hunt said following the board meeting. "We appreciate the NCUA’s commitment to exam modernization as it considers moving the process to a predominately offsite model. We also encourage the agency to fully transition to its extended examination cycle and provide more frequent updates on the exam modernization process. Today, credit unions are well capitalized and healthy, and any future changes to exams should promote continued industry health without creating unnecessary burdens."

NAFCU has consistently pushed the NCUA for updates on exam modernization. NAFCU President and CEO Dan Berger previously called on the agency to provide additional examination flexibility and make other regulatory adjustments to ensure credit unions can focus on helping members during the coronavirus pandemic.

He also discussed exam relief in conversations with NCUA Board Chairman Rodney Hood, NCUA Board Member Todd Harper and McWatters

Briefing on Minority Depository Institutions Annual Report

In addition, the board reviewed its annual report to congress on minority depository institutions (MDIs). The agency highlighted that it awarded $738,000 in technical assistance grants to 258 MDI credit unions last year to develop digital tools, support outreach programs, and provide training to staff to better serve underserved communities and offer financial counseling.

Hood stressed the important role credit unions and MDIs play in promoting financial inclusion and the well-being of minority and underserved communities. He also reviewed the benefits of being an MDI and the NCUA's MDI mentorship program.

The NCUA earlier this week extended the deadline to apply for an MDI mentorship grant until July 31.

Other items to note

The board also issued a final rule to make technical amendments to various provisions of the NCUA's regulations, including general wording, style, and cross-reference changes.

The board was expected to issue a proposed rule on risk-based net worth, but that item was removed from Thursday's agenda.

NAFCU will continue to urge the agency to grant additional capital flexibility and provide parity with banks amid the coronavirus pandemic and has led efforts to ensure credit unions and their members benefit from a modern capital regime.