NAFCU, CUNA Oppose Broader Fundraising Powers for NCUA

CUNA and NAFCU urged the Senate Banking Committee to reject the NCUA’s request for broader authority to raise Share Insurance Fund premiums, saying the current rules have proved ample to cover systemic risks.

Congress created the National Credit Union Share Insurance Fund (SIF) in 1970 to insure member deposits up to $250,000. It put the NCUA in charge of managing it.

The NCUA funds it through premiums paid by credit unions to keep its equity ratio at a “normal operating level” of between 1.2% and 1.5%. The NCUA board sets that level, which is now 1.38%. Amounts collected in excess are returned to credit unions.

NCUA Chairman Todd Harper asked Congress in April to consider revising those rules to give the NCUA powers that more resemble those granted to the FDIC for banks. He testified in person Tuesday at the Committee on Banking, Housing, and Urban Affairs hearing on “Oversight of Regulators: Does our Financial System Work for Everyone?”

In advance of his testimony, Harper sent a 21-page letter that included a request that Congress enact legislation that:

• Increases the fund’s capacity by removing the 1.5% statutory ceiling on the normal operating level.
• Removes the interim limitation on assessing premiums when the equity ratio exceeds 1.3%, granting the NCUA board discretion on the assessment of premiums.
• Provides the NCUA board with the option to use risk-based premiums and use total assets as the assessment basis, not insured shares.

CUNA and NAFCU also sent letters to the committee, both arguing that the changes were unnecessary and asking the committee to reject the NCUA’s attempt to expand its fundraising powers.

CUNA President/CEO Jim Nussle wrote that the SIF has performed better than the FDIC’s fund over the years, and the NCUA already has adequate tools to maintain the fund.

“This is truly a solution in search of a problem,” Nussle wrote. “Making the proposed changes would take money out of credit union members’ accounts to over-insure a fund that historically has performed its function very well.”

Brad Thaler, NAFCU’s vice president of legislative affairs, wrote that the SIF’s performance over the last 16 months has shown that the fund is strong and that credit unions were well-capitalized and had strong balance sheets in March 2020 when COVID-19 was declared a pandemic, and triggered a crisis.

“This provided them with the necessary scope to extend assistance to their members during the pandemic,” Thaler wrote.

Thaler wrote that the SIF is different from the FDIC fund for good reasons.

The Federal Credit Union Act, which created the SIF, “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% should it fall below that level,” Thaler wrote.

“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 to keep funds available to credit union members,” Thaler wrote.