NCUA Board Recommends Against Private Insurance in Colorado

ALEXANDRIA, Va.-All three NCUA Board members warned the Colorado financial services regulator in a Dec. 12 letter against permitting private share insurance for the state’s state chartered credit unions. “We recognize that this is a public policy decision that is properly within your jurisdiction as Commissioner of the Colorado Division of Financial Services,” the letter to Colorado Financial Services Commissioner David Paul read. However, the board members continued, “In our view, federal share insurance, backed by the full faith and credit of the United States government, is the superior product for credit unions, their members, and public policy.” The letter explained that most states required federal share insurance; that the NCUSIF is well diversified; that NCUA’s organization, independence, and resources are important to safety and soundness; that federal insurance avoids consumer confusion; and that NCUSIF coverage is reasonably priced. “Any legitimate study of an important public policy issue welcomes input from all perspectives,” Paul said. “Therefore, the NCUA Board’s letter, while containing mostly information already known to the Division of Financial Services, is appreciated and will be considered in our study process.” NCUA Chairman Dennis Dollar explained the board’s decision to write the letter. “Just as it is perfectly normal and totally appropriate for state regulators to comment on regulatory proposals before the NCUA, we feel it is also within our proper role as the statutory administrator of the NCUSIF to extol its public policy value any time a state is considering a regulatory proposal involving deposit insurance,” he said. He emphasized his deep respect for states’ rights and support for the dual chartering system. Colorado regulators have been talking to states with and without private insurance, the league, American Share Insurance, and Colorado credit unions, as well as NCUA staff on the issue. Paul said only a handful of credit unions have expressed a serious interest in converting to private primary deposit insurance coverage. According to Colorado Credit Union Center Senior Vice President of Government Affairs and Public Relations John Sheehy, the league board voted unanimously to send a message to the commissioner in support of the change. He agreed that while only a few state chartered credit unions seriously wanted to convert, about two-dozen are interested in having the option. Sheehy said they have cited reasons from increased coverage to less regulation for wanting their choice of deposit insurance coverage. Under Colorado law, the commissioner is charged with determining if ASI coverage is “comparable” to federal insurance coverage. “Certainly full faith and credit [of the federal government] is an issue, but it’s one of a number of issues that have arisen,” Paul explained. He said that his study of the situation should be completed sometime in January. If the study finds that ASI is comparable, a second level of study will be necessary, Paul said. “We’ve said it’s legal. Now what do we need to do to make it feasible,” he clarified, if the agency finds private primary deposit insurance coverage is permissible. Dollar explained that all three board members signed the letter because it will serve as a template to be used for any states considering private insurance in the future. [email protected]