The National Credit Union Administration board today proposed a rule that would allow federal credit unions to have up to 50% of their deposits come from other credit unions and government entities, up from a 20% cap today. As NCUA acknowledged in its proposal, the 20% cap dates to the late 1980s and was imposed “because of the asset/liability management problems related to public unit and nonmember shares that arose at certain FCUs, which resulted in material losses for the National Credit Union Share Insurance Fund.”
Under the proposal, FCUs could take insured deposits (or “receive payment on shares,” in NCUA terminology) of up to half of their paid-in and unimpaired capital and surplus, less the public unit and non-member shares. Public units include the federal government, states and territories, counties and municipalities and tribal entities. Under the proposal, designated low-income FCUs—which account for 57% of all FCUs, according to current NCUA figures—would be able to accept deposits from any non-member up to the 50% level. Comments on the proposal are due 60 days after publication in the Federal Register.
The American Bankers Association criticized the “deeply troubling” proposal. “It would allow credit unions to take even more deposits from outside their traditional membership base, further accelerating their growth at a time when NCUA is already struggling to oversee the industry and putting taxpayers at risk,” said ABA’s Ken Clayton. “This proposal also undermines one of the founding principles behind credit unions, the cooperative notion that the resources for credit union lending come from their members and that they serve people of modest means who share a common bond.” For more information, contact ABA’s Alison Touhey.