The California and Nevada Credit Union Leagues, Credit Union National Association (CUNA), American Association of Credit Union Leagues (AACUL), and 42 other state credit union leagues and associations sent a letter this week to the Federal Reserve advocating for the inclusion of 106 privately insured credit unions across 10 states into the Bank Term Funding Program (BTFP).
The Fed created the BTFP on March 12 as a new temporary facility to make liquidity available for depository financial institutions. It was created in the wake of the failures of Signature Bank and Silicon Valley Bank. The facility’s purpose is to relieve contagion fear and the pressure that follows for federally insured depository institutions.
“Other non-federally insured depository institutions, like privately insured credit unions, are not necessarily immune from those same pressures,” the letter states. “In addition, privately insured credit unions are being penalized by not being able to access the low-cost liquidity provided by the BTFP.”
The letter states that private deposit insurance plays an integral part of the credit union dual-chartering system. The dual chartering system provides states and credit unions with a choice of regulator and applicable law. It has been widely recognized that the dual chartering system has successfully served as an incubator for innovative approaches to regulation and administration of financial institutions.
“States should be able to retain the right to offer private insurance to their credit unions as an option, always subject to appropriate safety and soundness considerations,” the letter adds.
You can read the entire letter here.