National Credit Union Administration Chairman Todd Harper asked the House Financial Services Committee Wednesday to push legislation that would give the agency more flexibility to impose premiums to shore up the agency’s Share Insurance Fund.
“Under current law, the NCUA does not have the appropriate flexibility necessary to manage the Share Insurance Fund in a manner consistent with the growing size and complexity of the credit union industry, as well as with broader national financial stability goals,” he said.
Harper told the committee that the agency’s equity ratio has suffered a steady decline since 2014. The agency board has set the ratio at 1.38%, but because of a large influx from pandemic-related assistance, the equity ratio stood at 1.26% in February. Federal law requires the NCUA board to develop a restoration plan if the ratio drops below 1.20%.
The NCUA board is scheduled to receive an update on the equity ratio at its meeting Thursday.
Harper repeated the legislative changes that he proposed in a March letter to Senate Banking Committee ranking Republican Sen. Pat Toomey of Pennsylvania.
He said that Congress should remove the limit on assessing premiums when the NCUA equity ratio exceeds 1.30%–granting the agency board discretion on the assessment of premiums. He also said that Congress should remove the 1.5% statutory ceiling on Share Insurance Fund capitalization and institute a risk-based premium system.
“These recommended changes, if enacted, would allow the NCUA Board to build, over time, enough retained earnings capacity in the Share Insurance Fund to effectively manage a significant insurance loss without impairing credit unions’ contributed capital deposits in the Share Insurance Fund,” he said.
Harper also said that the NCUA can—and will—increase its focus on consumer protection. He said that the agency is developing a proposal to increase consumer compliance procedures for the largest credit unions that are not supervised by the Consumer Financial Protection Bureau.
It was unclear whether such a proposal would have to go before the NCUA board. Republican board members Rodney Hood and Kyle Hauptman said that the agency’s current consumer protection efforts are adequate.
Congress also should give the NCUA supervisory power over vendors, including Credit Union Service Organizations, Harper said. He said that credit unions increasingly are relying on third-party vendors, adding that the agency can only examine them with their permission. He said those vendors have, at times, declined such requests.
“Congress should close this legislative blind spot,” he said. He reminded committee members that the NCUA is the only banking regulator that does not have supervisory authority over vendors.
Finally, Harper asked the committee to push to make pandemic-related changes to the NCUA Central Liquidity Facility permanent.