NCUA’s nonmember deposits proposal in Federal Register Thursday, comments due late July

A comment deadline of July 29, or about that date, is slated for a proposed rule issued last week that would increase the amount of public unit and nonmember shares that could be held by federally insured credit unions (FICUs).

The proposed rule, released on a unanimous, 3-0 vote May 23 by the National Credit Union Administration (NCUA) Board for a 60-day public comment period, would revise the basis for measuring the regulatory limit on nonmember and public unit shares that could be held by FICUs. The agency estimates an increase of 6%, or about $135 billion, in system funding capacity under the proposal.

The proposed rule is scheduled for publication in Thursday’s Federal Register. It would revise current rules as follows:

  • The limit on public unit and nonmember shares would be revised to 50% of paid-in and unimpaired capital and surplus less public unit and nonmember deposits.
  • The alternative cap of $3 million would be removed.
  • The ability to seek a waiver to receive more such funds would be removed.
  • A credit union would be required to submit a plan to its NCUA regional director for the use of such funds if public unit and nonmember shares plus borrowings would be greater than 70% of paid-in and unimpaired capital and surplus. (The current requirement is to submit a plan if pubic unit and nonmember shares would exceed 20% of paid-in and unimpaired capital and surplus.)

Currently, NCUA rules permit a credit union to take in total public unit and nonmember shares – often referred to as “nonmember deposits” – totaling up to 20% of shares or $3 million, whichever is greater. A waiver is required to exceed the regulatory limit. Also, only credit unions designated as low-income by the agency are permitted to accept nonmember shares, a provision that would not change under the proposed rule.

NCUA says that, just based on the math involved under the proposed rule, credit unions would have to have a net worth ratio of at least 17% to use the full proposed authority. Staff noted also that smaller credit unions tend to have higher net worth than larger ones so, in effect, would be the primary beneficiaries of the proposed rule.

In keeping with recommendations of NCUA’s Regulatory Reform Task Force, the proposal would align the limit on public unit and nonmember shares with the Federal Credit Union Act limit on borrowings.

Federal Register notice for Thursday

RR: More public unit and nonmember shares would be OK for credit unions under NCUA proposed rule (May 23, 2019)

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