ARLINGTON, Va.—With NCUA indicating an NCUSIF premium may be in the offing, NAFCU is proposing some alternatives.
Following last week's NCUA meeting during which the agency discussed the effect of the pandemic on credit unions' share growth and the National Credit Union Share Insurance Fund's (NCUSIF) equity ratio, NAFCU's Curt Long advised the NCUA board to consider measures to allow credit unions additional investments – even on a temporary basis – rather than assess a premium to lower the ratio.
As CUToday.info reported, during the board meeting the NCUSIF quarterly report revealed that credit unions have seen share growth of almost 13% through the first six months of 2020, causing the NCUSIF's equity ratio to fall to 1.22%. If the equity ratio falls below 1.2%, an issue board members Todd Harper and J. Mark McWatters indicated might occur, NCUA is statutorily obligated to establish a restoration plan and could potentially assess a premium charge to restore the NCUSIF.
"NAFCU would oppose any SIF premium that is largely intended to remedy the temporary effects of increased share growth during the COVID-19 pandemic," wrote Long, NAFCU's chief economist and vice president of research. "In lieu of imposing a premium, NAFCU supports the NCUA adopting or supporting relief measures to provide credit unions with more options to manage the large influx of deposits, including additional temporary investment authorities."
No Need for ‘Drastic Measures’
Long noted that natural-person credit unions are not allowed to invest in asset-backed securities, while credit union service organizations (CUSOs) are. In addition, while federal credit unions are not explicitly permitted to invest in corporate bonds, some states permit state-chartered credit unions to do so.
"NAFCU encourages the NCUA to evaluate its authority under the [Federal Credit Union Act] to permit such investments on a temporary basis to ensure the safety and soundness of the industry while helping to restore the equity ratio without more drastic measures such as assessing a premium."