"Well done is better than well said."
These wise words came from one of our nation's most quotable founders, Benjamin Franklin. His pithy quote came to mind as I thought about the many changes the National Credit Union Administration has recently made to improve the chartering process and its support of new credit unions. Indeed, the chartering of new credit unions to advance the financial security and prosperity of all Americans, especially those of modest means, is a core mission of the NCUA.
From 2012 through 2022, the number of federally insured credit unions annually decreased 3.5% on average, while the number of credit union members grew an average 3.7%. During that same 10-year period, the NCUA issued 27 new federal charters, with five more applications pending at this time.
While these numbers by no means indicate an increase in the overall number of credit unions — as the consolidation of credit unions and banks has been consistent for decades across various economic and regulatory cycles — they are a positive step forward in establishing more credit unions.
But, why the relatively low number of new credit unions? There are several reasons, including the emergence of nondepository financial institutions and fintechs as well as the pressure to achieve economies of scale. While the NCUA can't change these factors, it is addressing two of the main contributors to the undersupply of new credit unions: assisting prospective credit unions with gaining the required capital and reducing the length and burden of the chartering process.
The ability to secure adequate capital is vital to the long-term viability of any new credit union. Far too often, however, prospective credit unions find themselves in a chicken-or-the-egg causality dilemma: The organizers need capital to get a charter, but they can't get the capital without the charter. This conundrum often leaves organizing groups rightfully discouraged.
To break this cycle, the NCUA announced in June its intent to launch a provisional charter pilot program. A provisional charter would allow organizing groups to show they have the capacity to start a credit union which, in turn, could facilitate their efforts to raise needed capital.
In this pilot, the NCUA would grant an
Separately, NCUA's experts are exploring the pooling of capital for starting new credit unions, like the FDIC's Mission-Driven Bank Fund launched in 2021. Such a fund in the credit union space could provide groups the much-needed capital to start new credit unions more easily.
What's more, over the last year, the NCUA has taken several actions to streamline the chartering process. We overhauled the Federal Credit Union Charter Application Guide and its supporting documents to provide a clear, step-by-step roadmap for organizers to successfully apply for a new federal charter.
Now, instead of taking years to approve applications, the NCUA has reduced the time to review and approve a completed application to approximately 130 days from start to finish. Compare this figure to an average of 564 days in 2018. The trend is moving in the right direction as the number of new charters increased from just one in 2020 to four each in 2021 and 2022.
Most importantly, the organizers of these newly chartered credit unions have often sought to expand access to financial products and services within diverse, under-resourced and unbanked communities. Some of these new charters are now serving Native Americans in Montana; low- and moderate-income communities in Arkansas, Missouri and Florida and members of an Islamic congregation in New Jersey, just to name a few.
Within statutory and safety-and-soundness guardrails, the NCUA is committed to working with organizing groups to get to "yes" with each application received. In that regard, our work is fulfilling the NCUA's strategic goal of creating a more effective chartering process and facilitating access to safe, fair and affordable financial products and services for all Americans.
Newly chartered financial institutions, whether credit unions or banks, are essential to a dynamic financial system. By facilitating the access of credit union organizers to capital and streamlining and automating the application process as appropriate, the NCUA is leveling the playing field and supporting groups of all circumstances and interests.
Said another way, at the NCUA we're not just talking the talk about new charters, we're walking the walk to create a more equitable financial system that works for everyone.
