February 19, 2021

NCUA Board reviews SIF status, ways to manage fund

NCUAAs the NCUA Board Thursday received a quarterly briefing on the National Credit Union Share Insurance Fund (NCUSIF), Chairman Todd Harper said the fund is the agency's top priority for 2021 as it works to ensure it can withstand fallout from the COVID-19 recession, and again indicated that a premium may be assessed this year.

"NAFCU strongly believes that charging a SIF premium is unnecessary as the fund rests on solid financial footing," said NAFCU Chief Economist and Vice President of Research Curt Long. "Amid a global pandemic and economic downturn, credit unions should be allowed to direct the money they hold toward serving their members, and it should not be siphoned off into an already stable and healthy SIF."

Harper, in his comments, acknowledged that a premium would be a short-term solution and said additional reforms, such as Congress granting the NCUA additional flexibility to manage the NCUSIF, are needed. NAFCU has urged the NCUA to consider alternatives, including granting credit unions additional investment authorities even on a temporary basis, instead of charging a premium to address credit unions' strong share growth amid the coronavirus pandemic.

The board's NCUSIF briefing explored the fund's year-end financials, which showed its equity ratio stood at 1.26 percent. Ahead of the meeting, Long detailed how the method for calculating the equity ratio creates a "mismatch" for a short period of time, and argued that the equity ratio will soon rise above the 1.3 percent threshold – the point at which the NCUA is allowed to charge a premium – after the NCUA finalizes call report data and invoices are sent to credit unions to true up capitalization deposits. This mismatch was also discussed by the board during Thursday's meeting, with NCUA staff saying the capital adjustment that the agency will bill for in March could increase the equity ratio by about five basis points.

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. 

In addition to the NCUSIF briefing, the board Thursday unanimously approved a final rule related to joint ownership share accounts. NAFCU supported the rule, which was finalized largely as proposed, as it will provide targeted regulatory relief by allowing federally-insured credit unions to use information in account records to establish co-ownership of the share account and satisfy the signature card requirement.

The final rule includes a clarifying change "to better convey the examples of evidence of co-ownership in the proposed regulatory text do not define the only form of evidence that could satisfy the signature requirement." It is set to take effect 30 days after publication in the Federal Register.

The NCUA Board also received a briefing on the Treasury Department's Emergency Capital Investment Program (ECIP). Federally-insured credit unions designated as a Community Development Financial Institution (CDFI) or Minority Depository Institution (MDI) can participate in the program, so long as they are not designated in "troubled condition" and have no formal enforcement actions for unsafe or unsound lending practices.

The briefing has additional information on the application process, answers to questions about the lending plan's requirements, and receiving ECIP funds in the form of subordinated debt.