February 26, 2021

NAFCU outlines NCUSIF health to Congress, lack of need for premium, changes

Curt LongAs the NCUA Board analyzes the state of the National Share Insurance Fund (NCUSIF) and considers whether a premium will need to be assessed this year, NAFCU's Curt Long wrote leaders of the House Financial Services and Senate Banking Committees Thursday outlining the health of the fund, including why a premium is not warranted at this time, and urging against any amendments to the Federal Credit Union (FCU) Act that would change the way the NCUA manages the NCUSIF.

NAFCU has consistently advocated against charging credit unions a premium amid the coronavirus pandemic in order to keep resources with the institutions so they can provide the products, services, and flexibility needed to members struggling amid the crisis.

According to the agency's quarterly NCUSIF report, the fund ended 2020 with an equity ratio of 1.26 percent, which is below the 1.3 percent threshold that allows the NCUA to assess a premium; the ratio must be kept above 1.2 percent. NCUA Chairman Todd Harper has previously indicated support for Congress granting the NCUA powers similar to what the FDIC has to manage the Deposit Insurance Fund (DIF), which would give the agency more authority to charge premiums.

"NAFCU is opposed to any efforts that call for legislative changes to the FCU Act to give NCUA the powers to manage the SIF similar to the DIF, such as allowing new premium assessments when they are not needed, removing upper limits on the normal operating level or making changes that threaten the mutual nature of the fund," wrote Long, NAFCU's chief economist and vice president of research. "The FCU Act recognizes the importance of not hitting credit unions and their members with an unnecessary premium through very specific language that gives the NCUA an eight-year (or longer) window to restore the SIF equity ratio to 1.2 percent should it fall below that level.

"We caution against any calls for statutory changes to the SIF that go against the spirit of this provision in the Act—a provision that is designed not only to keep credit unions healthy, but also keep funds available to credit union members," Long advocated.

Long detailed how the method for calculating the equity ratio creates a "mismatch" for a short period of time and noted that it is expected to soon rise to 1.31 percent after the NCUA finalizes call report data and invoices are sent next month to credit unions to true up capitalization deposits.

Long acknowledged the economic impacts of the pandemic and highlighted how credit unions are working to support their members. He called on Congress to instead support efforts that give credit unions additional capital flexibility and expand investment opportunities to address some of these issues.

NAFCU will continue to advocate for a strong NCUSIF that is proactively managed with a goal of identifying and quantifying salient risks, which must be balanced with the understanding that credit union resources are scarce.