Removing Barriers Blog

NCUA Board Holds May Meeting
Posted May 20, 2021 by CUNA Advocacy

Board Briefing – Share Insurance Fund Quarterly Report

Today’s report on the Share Insurance Fund showed total income of $58.9 million and net loss of $67 million for the quarter ending 3/31/2021. The balance sheet indicated total liabilities and net position of $19.773 billion, an increase of $644 million from the previous quarter. The Fund’s reserve balance stands at $177.2 million as of the end of the fourth quarter, with $21.3 million being for specific reserves. There were two credit union failures in the first quarter of 2021, at a cost of $3.1 million to the Fund. The number of CAMEL Code 4/5 credit unions decreased slightly from the preceding quarter to 154; CAMEL Code 3 credit unions increased slightly to 754.

The equity ratio of the Fund stands at 1.26%. The projected equity ratio for June 30 is 1.22%. While this is below the Normal Operating Level (NOL) of 1.38%, it is above the 1.20% threshold that would require the Board to institute a formal Fund restoration plan. According to staff, the June 30 actual equity ratio will be available within the next few months.

Chairman Harper reiterated his position for the NCUA to have more flexibility to proactively manage the Fund, allowing the agency to build appropriate reserves in good times, to cover losses in bad times. Vice Chairman Hauptman maintained that for now, the most prudent action is to stay on top of developments while remaining cautious about taking money from credit union members and sending it to the NCUA, “an itchy trigger finger is not a good thing.”

 

Request for Comment – Share Insurance Fund Normal Operating Level Policy

The current policy establishes the following objectives that the Board will seek to satisfy when setting the NOL:

  • Retain public confidence in federal share insurance;
  • Prevent impairment of the one percent contributed capital deposit; and
  • Ensure the Fund can withstand a moderate recession without the equity ratio declining below 1.20% over a five-year period.

The Board seeks comments on the policy and approach for setting the NOL of the NCUSIF. The request for comment includes a number of questions pertaining to how the NOL is modeled.

The NCUA will accept comments for 60 days following publication in the Federal Register.

 

Final Rule – Derivatives (Parts 701, 703, 741, & 746)

The Board adopted a final Derivatives rule intended to modernize the rule and make it more principles-based, while retaining key safety and soundness components. The changes provide greater flexibility for federal credit unions to manage Interest Rate Risk through the use of Derivatives.

CUNA filed a comment letter in support of proposed changes to NCUA’s Derivatives rule.

The Derivatives rule will become effective 30 days after publication in the Federal Register.