CUNA Argues Against Need for NCUSIF Premium in 2017

The Credit Union National Association this week asserted the National Credit Union Administration should wait before instituting a premium to support the National Credit Union Share Insurance Fund.

The regulator has signaled the possibility of a premium ranging from three to six basis points in 2017, which a CUNA white paper characterized as "surprising" given the current and prospective condition of the fund, as well as the agency's past practice.

"There is no good reason for the NCUA to tinker with the National Credit Union Share Insurance Fund," CUNA wrote.

According to Bill Hampel, CUNA's chief policy officer, "Although the normal operating level of the equity ratio of the fund is currently 1.3% of insured shares, NCUA's practice over the past three decades has established a normal operating range of 10 basis points below that level, from 1.2% to 1.3%," he wrote in the white paper. "Under NCUA's base case assumptions, the fund will end 2017 with the fund ratio at 1.25%; under its pessimistic assumptions, at 1.24%. In its 30-year history, the fund has six times ended the year with an equity ratio of 1.25% or lower without charging a premium.

"Premiums have been reserved for cases when the fund would end the year very close to or below the 1.2% level that triggers a premium requirement," Hampel added.

Therefore, Hampel argued, if NCUA follows past practices and policies managing the fund, a premium in 2017 is a "remote possibility," CUNA believes.

Change In Policy?
Hampel said if NCUA does charge a 2017 premium – despite the fact that the fund's equity ratio will be in the middle of the normal operating range – that suggests a "likely change" in future fund management policy, including the likelihood of raising the normal operating level of the fund above 1.3%.

"CUNA believes there is no good reason to tinker with the natural person credit union share insurance fund that has performed so reliably over the entire 30 years of its current form of capitalization, despite turbulent financial markets over that period," the paper reads. "Reforms may well be necessary for the FDIC, which suffered two periods of massive volatility in the bank insurance fund ratio. NCUSIF experienced no similar volatility, so FDIC-like reform of the credit union fund is completely unnecessary.

"Changes to the structure and operation of corporate credit unions since the financial crisis have made them safe and sound partners to natural person credit unions that present negligible risk to the share insurance fund," Hampel added.