ALEXANDRIA, Va.–NCUA said its four funds have again earned unmodified, or “clean,” audit opinions for 2020, but the agency’s Office of Inspector General (OIG) also said there are challenges for credit unions that could affect future audit performance.
The report on the National Credit Union Share Insurance Fund (NCUSIF) shows the equity ratio stood at 1.26% as of Dec. 31, which is below the 1.3% equity ratio that is the standard measure for whether credit unions should be charged a premium to replenish the fund. In a statement, NAFCU’s chief economist, Curt Long, said the equity ratio is expected to soon rise above 1.3% and as a result there is no need for any premium.
The equity ratio has declined in part because of an influx of deposits and a decline in lending during the coronavirus-related economic slowdown.
“The association also believes that the SIF should be managed proactively with a goal of identifying and quantifying salient risks, which must be balanced with the understanding that credit union resources are scarce,” NAFCU said.
NAFCU sent a letter to NCUA saying the equity ratio also reflects a “temporary mismatch” that will soon be adjusted. The letter can be found in CUToday.info’s The Gov here.
The NCUA board will receive a report on the NCUSIF and the other funds during today’s board meeting.
The 4 Funds
NCUA’s OIG released the financial statements, audited by the independent auditor KPMG LLP, which cover, in addition to the NCUSIF, the agency’s Operating Fund, the Central Liquidity Facility, and the Community Development Revolving Loan Fund.
The Share Insurance Fund, which held assets of $19.1 billion on Dec. 31, 2020, protects the deposits of more than 124 million members at more than 5,000 federally insured credit unions.
In its report accompanying the release of the audited statements, the OIG said the major challenges in 2021 for credit unions and the four funds include cyber threats, technology-driven changes to the financial landscape, interest-rate risk, membership trends, and a recovery from the coronavirus crisis.
“We believe the economy and credit unions’ recovery from the COVID-19 pandemic will be the NCUA’s greatest management challenge going forward in 2021 and possibly beyond,” the OIG report states. “Even if the economy continues to recover as expected, the operating environment for credit unions over the next two years could prove to be more difficult than in prior years, and credit union performance could deteriorate. Credit unions should plan for a range of economic outcomes that could affect their performance and resource needs.”
Details in Report
The report and additional details on each of the areas highlighted by the OIG can be found here.