Final Rule – Joint
Ownership Share Accounts (Part 745)
The Board adopted a final rule
that amends its share insurance regulation governing the requirements for a
share account to be separately insured as a joint account by the NCUSIF.
Specifically, the final rule provides an alternative method to satisfy the
membership card or account signature card requirement necessary for insurance
coverage. Under the final rule, even if a credit union cannot produce
membership cards or account signature cards signed by the joint accountholders,
the signature card requirement can be satisfied by information contained in the
account records of the credit union establishing co-ownership of the share
account. This final rule mirrors a 2019 change to the FDIC’s Deposit Insurance
Fund regulations.
CUNA filed a comment
letter in support of this change, which we believe will provide increased
flexibility by establishing an alternative method to satisfy the existing
signature card requirement.
The final rule will become
effective 30 days after publication in the Federal Register.
Board Briefing –
Consolidated Appropriations Act, Emergency Capital Investment Program
The Board was briefed
on the Emergency Capital Investment Program (ECIP) that was established by the
Consolidated Appropriations Act. The ECIP was created to encourage low- and
moderate-income community financial institutions—which include CDFIs and
MDIs—to augment their efforts to support small businesses and consumers in
their communities. The total appropriated amount for the ECIP is $9 billion.
A credit union applying for
ECIP funds in the form of Subordinated Debt that is also a LICU may submit a
Secondary Capital plan to recognize the ECIP investment amount as Net Worth.
The Secondary Capital application is separate from the (Treasury) ECIP
application.
In response to a question
from Chairman Harper, staff noted that there is a total pool of 747 credit
unions that will be eligible for the ECIP (i.e., federally insured
credit unions that are CDFIs or MDIs), from which 634 credit unions would be
eligible for Secondary Capital (i.e., those with a LICU designation).
More information, including
the draft application can be found on Treasury’s ECIP
website. For questions regarding the ECIP and to be informed about program
updates, you can contact Treasury.
For questions about Secondary Capital and the relationship to the ECIP, you
should contact your Regional Supervision Office.
Board Briefing – Share
Insurance Fund Quarterly Report
Today’s report on
the Share Insurance Fund showed total income of $60.9 million and net loss of
$13.7 million for the quarter ending 12/31/2020. The balance sheet indicated
total liabilities and net position of $19.129 billion, a slight decrease from
the previous quarter. The Fund’s reserve balance stands at $177.3 million as of
the end of the fourth quarter, with $18.1 million being for specific reserves.
There was a single credit union failure in 2020, at a cost of $1.6 million to
the Fund. The number of CAMEL Code 4/5 credit unions decreased slightly from
the preceding quarter to 159; CAMEL Code 3 credit unions also decreased
slightly to 748.
The Fund’s equity ratio
stands at 1.26% as of December 31, below the Normal Operating Level of 1.38%.
The primary driver of the decrease in the ratio is faster growth in insured
shares.
In expressing concern that
the equity ratio has steadily declined since the end of the Great Recession,
Chairman Harper stated that the agency’s top priority for 2021 is to ensure the
credit union system and the NCUSIF are prepared to weather any economic fallout
related to the pandemic. Further, while no decision on a premium assessment was
announced today, Harper went on to say that with the growth of shares likely to
remain elevated in 2021, it is increasingly clear the question is no longer if
we have to assess a premium but when and how much.
Staff noted that the next
semi-annual true-up of the 1% capitalization deposit will be invoiced in March
and collected in April. Staff anticipates the true-up will result in an
increase of $866 million, which is equivalent to about 5 basis points. However,
the impact of the true-up on the equity ratio will not be reported until June.
Chairman Harper further noted
that premiums are a short-term solution. He reiterated his position that a
long-term solution is to work with Congress to grant the NCUA additional
flexibility to manage the Fund, allowing it to build up reserves during good
economic times while avoiding premiums during times of economic stress.
CUNA has consistently opposed
a premium assessment at this time, urging the NCUA to refrain from taking such
action to address a temporary issue.