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Budget Approved & Proposed Rule on Financial Innovation

The National Credit Union Administration Board (NCUA) held its 11th open meeting — and fourth in-person meeting and final one for 2022 — this week, approving two items:

  • The agency budget for 2023 and 2024.
  • A proposed rule on financial innovation that would amend the NCUA’s regulations on eligible obligations and loan participations.

The NCUA Board also received a staff briefing on the National Credit Union Share Insurance Fund’s normal operating level for 2023.

Revised Budgets Approved for 2023, 2024
The NCUA Board unanimously approved the agency’s Operating, Capital, and National Credit Union Share Insurance Fund Administrative budgets for 2023 and 2024.

As part of approving the final 2023 budget, the Board also approved a $15 million credit against the 2023 Operating Fee, reducing by approximately 17 percentage points the amounts that would otherwise be due from credit unions that pay the fee. Average fees paid by federal credit unions will decline in 2023 by approximately 1.8 percent, the third consecutive year of declining fees.

Combined, the 2022 Operating, Capital, and Share Insurance Fund administrative budgets will be $360.4 million, an increase of $20.9 million, or 6.2 percent, compared to the 2022 Board-approved budget levels. The combined budgets for 2024 are estimated at $403.2 million:

  • Budget: 2023 versus 2024.
  • Operating: $344.2 million versus $387.6 million.
  • Capital: $11.3 million versus $11.2 million.
  • Share Insurance Fund Administrative: $5 million versus $4.4 million.
  • Grand Total*: $360.4 million versus $403.2 million.
  • * Note: grand total for 2023 adjusted for rounding.

“The budget is a consensus document,” Chairman Todd M. Harper said. “Compared to the overall funding and staffing levels shown in the staff draft budget, this budget is now smaller in terms of dollars and staff. However, it is still a step in the direction of achieving the NCUA’s mission of protecting credit union members and consumers, maintaining the safety and soundness credit unions, and safeguarding the credit union system and the National Credit Union Share Insurance Fund.”

The budget supports a total of 1,214 positions for 2023, and 1,240 positions in 2024. Information on the NCUA’s budget can be found on the Budget and Supplementary Materials page on

Board Approves Proposed Rule on Financial Innovation
The NCUA Board unanimously approved a financial innovation proposed rule that would amend the NCUA’s regulations on loan participations, eligible obligations, and notes of liquidating credit unions. The changes would primarily affect federal credit unions by removing current limits on purchases of eligible obligations and by removing qualifying criteria for federal credit unions to purchase non-member loans from federally insured credit unions.

The goal of this proposed rule is to clarify the NCUA’s current regulations and provide additional flexibility, thereby making it easier for federally insured credit unions to take advantage of advanced technologies and opportunities offered by the financial technology.

“These changes would move our regulations into more of a principles-based approach, similar to the NCUA’s recent efforts related to derivatives,” Chairman Harper said. “As I have emphasized before, credit unions should recognize and harness the potential opportunities fintechs may offer them. However, we must also acknowledge the potential risks they pose to credit unions, their members, and the system and develop appropriate guardrails. This proposed rule strikes that balance. It provides flexibility, safety, and tailored relief to credit unions while fostering greater innovation.”

Additionally, the proposed rule would:

  • Impose due diligence and risk management requirements on federal credit unions that purchase and sell eligible obligations.
  • Codify a 2015 legal opinion letter on the definition of originating lenders in the loan participation regulation, which applies to all federally insured consumer credit unions. The proposed rule would also make other clarifying changes.

Comments on the proposed rule must be received no later than 60 days following publication in the Federal Register.

Share Insurance Fund’s Normal Operating Level to Remain at 1.33 Percent
Staff from the NCUA’s Offices of Examination and Insurance and Chief Economist briefed the Board on the Share Insurance Fund’s normal operating level(opens new window) and recommended the current level remain unchanged at 1.33 percent. The normal operating level was last set and approved by the Board in December 2021.

Said Harper, “The Board’s policy stipulates setting the normal operating level to be sufficient to retain public confidence in federal share insurance, prevent the impairment of the one-percent contributed capital deposit, and ensure the Share Insurance Fund can withstand a moderate recession without the equity ratio declining below 1.20 percent over a five-year period. Given the level of economic uncertainty in the year ahead and the growing stresses we see within the credit union system, the staff policy based recommendation – to maintain the normal operating level at 1.33 percent in 2023 – is sound.”

The normal operating level is the equity ratio set by the NCUA Board based on the Share Insurance Fund’s forecasted needs. The Federal Credit Union Act allows the NCUA Board to set the normal operating level between 1.20 percent and 1.50 percent. Additional information on the normal operating level can be found on the NCUA’s website.

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