CU Trades Again Ask NCUA to Lower Normal Operating Level

Credit trade groups are continuing to press the National Credit Union Administration to lower its Normal Operating Level to 1.30%–a request that so far has been denied.

“We continue to call for the NOL to be returned to its historical 1.30%,” Luke Martone, senior director of advocacy and counsel at the Credit Union National Association, wrote in a letter to the agency Monday. “Since being increased in 2017, we have repeatedly urged the NCUA to reduce the NOL.”

“NAFCU opposed the 2017 increase in the NOL and has consistently advocated for a return of the NOL to 1.30 percent,” Curt Long, vice president of research and chief economist at the National Association of Federally-Insured Credit Unions, wrote in a letter to the agency.

The NCUA board has set 1.38% as the agency’s NOL.

The agency board decided earlier this year to seek public comment on its Normal Operating Level policy. Agency officials said the current policy objectives include ensuring that the insurance fund can withstand a moderate recession without the ratio dipping below 1.20% over a five-year period.

Agency officials reported last month that the NCUA’s equity ratio had dropped to 1.22%–far below the 1.38% NOL. If the equity ratio had dropped to 1.20%, the agency would have been required by law to develop a restoration plan.

Martone said the agency had increased the NOL when the Temporary Corporate Credit Union Stabilization Fund was merged into the Share Insurance Fund. Before that, the NOL had been 1.30 since 1984.

Long agreed that the NOL had been increased as a result of the closing of the stabilization fund. He said that the operating level should be set based on data and modeling, with the goal of providing a safety net for credit unions and their members, while also ensuring that credit unions are able to retain as much as possible to help their members. He added that the NCUA board should not be hesitant to lower the NOL if the data shows it can be safely lowered.

Martone added that CUNA opposes any plan to charge a premium soon and also opposes giving the NCUA board any additional flexibility in deciding when to charge credit unions a premium. Federal law prohibits charging a premium when the equity ratio reaches 1.50% or above.

NCUA Chairman Todd Harper had suggested that Congress change the law to allow the agency to charge a premium when the economy is strong to head off the need to charge premiums when the economy weakens.

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