In final notice, agency leaves door ajar for changes to ‘normal operating level’

The “normal operating level” of reserves for the fund that protects savings in credit unions will be reviewed “periodically” by the National Credit Union Administration (NCUA) Board, with action on revising the level taken only after the review suggests a change is warranted, a final notice to be published today will state.

Additionally, according to a the “final notice” of a rule adopted last week by the board on “Closing the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) and Setting the Share Insurance Fund Normal Operating Level,” any review by the board of the operating level will be accompanied with an analysis for stakeholders.

The board’s adoption of the final rule about closing the TCCUSF and setting the “normal operating level” (that is, the amount of funds held in reserve in the insurance fund, relative to total savings insured) was the subject of considerable debate during the comment period, which closed in early September after 30 days. The board proposed (and ultimately approved) setting the operating level at 1.39% of reserves to total insured shares.

However, a broad swath of commenters urged the agency to leave the level at the current 1.3%. Doing so would have meant insured credit unions would have received more in rebates because of the TCCUSF being closed and merged with the insurance fund.

As it is, with a 1.39% operating level, NCUA estimates credit unions will receive rebates (or “distributions”) of between $600 million to $800 million in the first quarter of 2018.

In its final notice, NCUA states that – after consideration – any change to the operating level of more than 1 basis point “shall be made only after a public announcement of the proposed adjustment” and opportunity for public comment. The agency said that, in soliciting comment, it will issue a public report, including data supporting the proposal.

Additionally, the board set three objectives in setting the operating level in the future, according to the notice:

  • Retain public confidence in federal share insurance;
  • Prevent impairment of the 1% contributed capital deposit; and
  • Ensure that the insurance fund can withstand a moderate recession without the equity ratio declining below 1.20% over a five-year period.

Final notice: Closing the Temporary Corporate Credit Union Stabilization Fund and Setting the Share Insurance Fund Normal Operating Level