ALEXANDRIA, Va.–The NCUA board has adopted revisions to an interpretive ruling and policy statement (IRPS) 13-1, which governs the Minority Depository Institution Preservation Program for credit unions.
In a 3-0 vote, the board approved a final interpretive ruling and policy statement that reflects the transfer of the MDI preservation program administration from the agency’s Office of Minority and Women Inclusion to its Office of Credit Union Resources and Expansion, updates the program’s features, and clarifies the requirements for a credit union to receive and maintain an MDI designation, among other changes.
The revised policy statement is effective 30 days after date of publication in the Federal Register.
Harper: Preserving the Character of CUs
In his prepared remarks, NCUA Chairman Todd Harper noted the federal credit union system was created nearly 90 years ago to meet the credit and savings needs of credit union members, especially those of modest means, and that much of that work is being done today by minority depository institution credit unions (MDIs). He further cited the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires support of MDIs.
About 10% of all federally insured CUs are MDIs, Harper added.
“As previously stated, I have long had concerns about preserving the character of a failing MDI credit unionduring the resolution process. Notably, this revised policy statement addresses those concerns,” Harper said. “Under the revised policy statement, in the event of a potential failure of an MDI credit union, the NCUA willcontact MDI credit unions in its merger registry that qualify to bid on a particular failing institution to measure their interest.
“Under this revised policy, the NCUA will additionally offer technical assistance to any MDI credit union desiring to bid, as well as two weeks to submit a bid, whenever possible,” Harper continued. “This vital change to maintain the character of a merging MDI institution will bring the NCUA emergency merger processin line with that of the Federal Deposit Insurance Corporation.”
Hauptman: This is ‘True Financial Inclusion’
In his prepared remarks, NCUA Vice Chairman Kyle Hauptman noted MDI CUs support nearly 5.3 million members, and added, “Credit unions are the original answer to financial inclusion. Started by people who were either overlooked by existing financial service providers or groups who wanted services tailored for their unique needs, credit unions have been a means for financial inclusion since their inception.
“Many companies have admirable financial inclusion goals, but credit unions – especially MDI credit unions – provide members the ultimate power of ownership and control. This is true financial inclusion,” Hauptman continued. “We know one of the main reasons small credit unions go away is because of the regulatory burden associated with running one of these small institutions. It can be a thankless task, a labor of love, by someone who eventually retires. That’s when mergers often happen, since it’s easier for a larger institution to handle the endless paperwork and mandates.
“My point here is that if we don’t lighten the regulatory burden on small credit unions, those that pose little risk to our Share Insurance Fund, then our talk about inclusion is just that – talk.”
Assistance Available
After outlining the ways a credit union can quality as a MDI (greater than 50% of the current membership must be a minority greater than 50% of the FOM must be a minority; greater than 50% of its board of directors must be a minority), Hauptman noted the MDI designation also brings with it a host of technical assistance and support.
“Although examination standards for MDI and non-MDI credit unions are the same, the NCUA recognizes that MDI credit unions have a distinct mission and business model. During 2023, the NCUA issued customized guidance to help examiners understand this business model compared to other financial institutions,” Hauptman said. “In further recognition of the difference between MDIs and non-MDIs, peer metrics were developed to help examiners compare MDI metrics with other MDI metrics instead of those of traditional peers.
Resources Matching Rhetoric
“Today’s board item touches on ways to help MDI members preserve their own financial institution. A lot of work goes into starting a credit union and it takes even more effort to keep it going,” he added. “As an agency that values inclusion, MDIs represent the opportunity to include resources with our rhetoric.”
Hauptman further said that any group that succeeds in forming their own credit union should have the opportunity to succeed, and that includes additional considerations for their unique challenges.
March Board Meeting Canceled
The NCUA Board has agreed not to meet in March. The next NCUA Board meeting will take place on April 18, 2024.
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