NCUA's Board Recap: Joint Ownership Accounts, ECIP, and SIF

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This week, the National Credit Union Administration (NCUA) board adopted a final rule that amends its share insurance regulation governing the requirements for a share account to be separately insured as a joint account by the National Credit Union Share Insurance Fund (NCUSIF).

Specifically, the final rule provides an alternative method to satisfy the membership card or account signature card requirement necessary for insurance coverage. Under the final rule, even if a credit union cannot produce membership cards or account signature cards signed by the joint accountholders, the signature card requirement can be satisfied by information contained in the account records of the credit union establishing co-ownership of the share account.

This final rule mirrors a 2019 change to the Federal Deposit Insurance Corporation’s (FDIC’s) Deposit Insurance Fund regulations.

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

Emergency Capital Investment Program
The board was briefed on the U.S. Treasury Department's Emergency Capital Investment Program (ECIP) that was established by the Consolidated Appropriations Act (CAA). The ECIP was created to encourage low- and moderate-income community financial institutions — which include Community Development Financial Institutions (CDFI) and Minority Depository Institutions (MDI) — to augment their efforts to support small businesses and consumers in their communities. The total appropriated amount for the ECIP is $9 billion.

A credit union applying for ECIP funds in the form of subordinated debt that is also a Low Income Credit Union (LICU) may submit a secondary capital plan to recognize the ECIP investment amount as net worth. The secondary capital application is separate from the Treasury's ECIP application.

More information, including the draft application, can be found on the Treasury’s ECIP website. Credit unions can also contact the Treasury for questions regarding the ECIP and to be informed about program updates. For questions about secondary capital and the relationship to the ECIP, credit unions should contact their NCUA regional supervision office.

Share Insurance Fund Quarterly Report
The board also received a report on the share insurance fund. As of Dec. 31, 2020, the share insurance fund’s calculated equity ratio was 1.26 percent, an increase from 1.22 percent reported as of June 30, 2020. The equity ratio was calculated on an insured share base of $1.5 trillion. The equity ratio was lower than the board-approved normal operating level of 1.38 percent. The primary driver of the decrease in the ratio is faster growth in insured shares.

In expressing concern that the equity ratio has steadily declined since the end of the Great Recession, NCUA Board Chairman Todd Harper stated that the agency’s top priority for 2021 is to ensure the credit union system and the NCUSIF are prepared to weather any economic fallout related to the pandemic. Further, while no decision on a premium assessment was announced during the meeting, Harper went on to say that with the growth of shares likely to remain elevated in 2021, it is increasingly clear the question is no longer if we have to assess a premium but when and how much.

NCUA staff noted that the next semi-annual true-up of the 1 percent capitalization deposit will be invoiced in March and collected in April. Staff anticipates the true-up will result in an increase of $866 million, which is equivalent to about 5 basis points. However, the impact of the true-up on the equity ratio will not be reported until June.

Harper further noted that premiums are a short-term solution. He reiterated his position that a long-term solution is to work with Congress to grant the NCUA additional flexibility to manage the fund, allowing it to build up reserves during good economic times while avoiding premiums during times of economic stress.

The California and Nevada Credit Union Leagues have consistently opposed a premium assessment at this time, urging the NCUA to refrain from taking such action to address a temporary issue.

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