Parity for Credit Unions, Other Issues Discussed on Capitol Hill

During a slew of federal banking regulator testimonies on Capitol Hill this week, National Credit Union Administration (NCUA) Board Chair Todd Harper said he would look to Congress to decide what potential changes in law should be passed on insurance coverage of deposit accounts — and which accounts those changes apply to.

Credit unions must receive parity with banks in any deposit reform legislation, the Credit Union National Association (CUNA) recently wrote in a letter to the House Financial Services Committee and Senate Banking, Housing and Urban Affairs Committee. Congress and the Federal Reserve have indicated interest in deposit insurance reform in the wake of recent high-profile bank collapses. (View more details by reading CU Strategies Amid Funding, Rates, Pricing, Insurance and Politics).

Harper said if Congress wanted to change levels of deposit insurance coverage and account types in alignment with potential changes to Federal Deposit Insurance Corporation (FDIC) insurance coverage beyond the current $250,000 per-account threshold, then the NCUA would defer to Congress’s direction.

However, there are two things the NCUA would like to see if Congress acts: parity between NCUA and FDIC deposit insurance for credit unions, and more flexibility when it comes to administering the National Credit Union Share Insurance Fund (NCUSIF). That’s because expanding federally insured credit unions’ coverage would raise the fund’s insurance costs over the long term.

Harper noted that the NCUA Board could then modify current premium assessment limitations and establish a higher normal operating level (NOL), similar to how the FDIC is structured. With these changes, NCUA could better build reserves during good economic periods so it’s prepared for downturns and recessions.

During the House’s committee hearing, Rep. Brad Sherman (D-CA) said he supported credit union parity with banks on several levels. “We need parity for credit unions — both as to the level of depositor insurance as to access to liquidity facilities,” Sherman noted. “The banks are not doing what we need them to do.”

CUNA Letter to House Financial Services
Meanwhile, in a letter sent to the House Financial Services Committee this week, CUNA highlighted the credit union system’s overall health and supported several NCUA-related priorities. The letter was sent for the record of the committee’s hearing on oversight of federal financial regulators.

The letter also noted the following:

• CUNA continues to strongly object to any suggestion that the NCUA may need to charge a premium in the near future and/or that statutory changes to the NCUSIF funding guidelines are needed.
• CUNA supports the extension of an expired CARES Act provision enhancing NCUA’s Central Liquidity Facility by, among other things, allowing corporate credit unions to act as agents for smaller (under $250 million in assets), non-CLF member, natural person credit unions.
• Credit unions must receive parity with banks in any increased federal deposit insurance coverage.
• Privately insured credit unions must have access to the Federal Reserve’s Bank Term Funding Program (BTFP).
• CUNA is concerned that granting NCUA supervisory authority over third-party vendors would require the agency to increase its budget to hire personnel with appropriate expertise.