NCUA Board Approves Updating MDI Preservation Program

During Thursday’s meeting of the NCUA Board, members voted 3-0 to approve a final interpretive ruling and policy statement to update the Minority Depository Institution (MDI) Preservation Program.

With this approval, the agency will transfer the administration of the MDI preservation program from the NCUA’s Office of Minority and Women Inclusion to the Office of Credit Union Resources and Expansion.

NCUA Board Chair Todd Harper stated, “The final MDI policy statement will better enable hundreds of MDI credit unions to meet the needs of their members and communities. Policy changes like this one make our country stronger.”

According to the NCUA, the final interpretive rule also updates the program’s features, and clarifies the requirements for a credit union to receive and maintain an MDI designation.

The revised policy statement is effective 30 days after date of publication in the Federal Register.

The final interpretive rule can be read on the NCUA’s website.

SIF Health & Losses

NCUA Board members received its quarterly Share Insurance Fund (SIF) update during the meeting which provided data through the fourth quarter of 2023.

According to NCUA officials, the SIF had a net income of $71.7 million, $21.4 billion in assets and $126.2 million in total income for the fourth quarter ending Dec. 31, 2023. The SIF’s equity ratio sat in a much better position of 1.30% than in the beginning of 2023 when it was 1.27%. The agency’s normal operating level for the equity ratio is 1.33%.

While the SIF news was good, Harper shared his concerns for certain segments of the credit union industry.

“Overall, the Share Insurance Fund’s performance in the fourth quarter of 2023 was strong,” said Harper. “While we should recognize those positive things, today’s presentation also illustrates why we cannot become complacent in the supervision of federally insured credit unions. In recent quarters, the NCUA has seen growing signs of financial strain on credit union balance sheets and consumer financial stress. And, we continue to see that financial stress manifest itself in the number of credit unions and the percentage of assets held by composite CAMELS code 3, 4, and 5 credit unions.”

Other items highlighted in the report for the fourth quarter of 2023 included:

• The number of composite CAMELS code 3 credit unions decreased from 777 to 776 at the end of the fourth quarter. Assets for these credit unions increased from the third quarter to $160.2 billion from $131.7 billion.
• The number of composite CAMELS codes 4 and 5 credit unions decreased from 131 to 125 at the end of the fourth quarter. Assets for these credit unions increased from $5.4 billion to $5.5 billion.

Harper said, “I cannot emphasize enough the importance of liquidity planning for financial institutions of all sizes, especially following the Federal Reserve Board’s decision to close the Bank Term Funding Program as scheduled on March 11. Credit unions will need to ensure they have ready sources of liquidity available should they need it. In fact, access to the NCUA’s Central Liquidity Facility and the Federal Reserve’s Discount Window should be part of participating credit unions’ broader liquidity risk management plans for a variety of contingencies, not just during times of crisis.”

NCUA officials also reported three federally insured credit unions failed in the fourth quarter of 2023 and cost the SIF roughly $1.4 million. None of the failures were due to fraud, according to the NCUA.

March Meeting Cancelled

Due to an unexplained technical issue, the livestream of the NCUA Board meeting stopped broadcasting during the first section of the meeting which covered the SIF update.

In a press release published after the Board meeting, it was announced that Board members agreed to cancel the March 21 meeting. According to an NCUA spokesperson, the meeting was “cancelled to allow Board members and staff time to prepare for the Board’s consideration of a final rule on chartering and field of membership for federal credit unions at the April Board meeting.”

That meeting is scheduled for April 18 at 10 a.m. EST.

The spokesperson also said a full recording of Thursday’s meeting is being prepared and will be published on the NCUA’s website.