NEW CASTLE, N.H.–NCUA is unlikely to assess a premium to shore up the insurance fund anytime soon, and any changes that might be made to FDIC insurance due to what’s taken place in the banking industry will need to be matched by the CU insurance fund, according to the agency’s leader.
NCUA Chairman Todd Harper was asked about the status of National Credit Union Share Insurance Fund (NCUSIF) and other issues during a Q&A with the audience attending the Cooperative Credit Union Association’s CU Accelerate conference in New Hampshire. The audience wanted to know how the fund has been performing given the rapid run-up in rates.
‘Doing a Couple of Things’
“We are doing a couple of things,” said Harper in response. “I can’t predict if there will be large credit union losses at this time. Typically, what we’ve seen in recent years is small credit unions that have led to losses, and those have been fairly manageable. We got dangerously close about a year ago with the run up of deposits that led to a decline in (the fund’s) equity to having an assessment.”
Harper noted that at that time, as CUToday.info reported, the NCUSIF’s equity ratio declined to 1.22%, close to the 1.2% floor at which NCUA is required to assess a premium to credit unions to raise the ratio. It currently stands at approximately 1.3%.
Changes to Investment Strategy
In addition, in anticipation of market turmoil, Harper said NCUA has been modifying the way it manages the NCUSIF’s approximate $20 billion portfolio of investments.
“First, we determined that there have been relatively stable, predictable losses,” Harper explained, “and we started to build out a 10-year strategy on investments. However, in the last year we have recalibrated that. By August we will have $4 billion in essentially overnight reserves. That $4 billion was calibrated deliberately by looking at what were the losses we saw during corporate crisis.
“I can never say never on a share insurance premium,” he continued. “There are also proposals in Congress that, due to the crisis, might mean changes to (deposit) coverage. I will be testifying before Congress in two weeks and I will stress two points: We need to have parity with the FDIC fund, and if we start to increase coverage levels there will be costs with that, which will mean we will need to hold more in reserves, in which case we would need an assessment.”
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