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.