The House Financial Services Committee on Wednesday will mark up legislation to make pandemic-related changes to the National Credit Union Administration’s Central Liquidity Facility permanent.
Credit union trade groups and NCUA Chairman Todd Harper have called on the House and Senate to enact those changes, contending that they are needed, as credit unions recover from the economic crisis caused by the pandemic. The provisions currently are set to expire at the end of the year.
H.R. 3958 was introduced by committee Chairwoman Maxine Waters, D-CA. and is cosponsored by committee Democrats Brad Sherman of California and Ed Perlmutter of Colorado.
“The CLF provides credit unions with a contingent source of funds to assist credit unions experiencing liquidity shortfalls during individual or system-wide liquidity events, similar to the Federal Reserve’s discount window for depository institutions,” House Financial Services Committee Democratic staff wrote in a memo explaining the proposal to be considered by the committee Wednesday.
The staff also noted that the CLF serves as an additional liquidity source for the NCUA’s Share Insurance Fund.
The legislation would make permanent pandemic-related provisions that increased the CLF’s borrowing authority from 12 times its total capital to 16 times its total capital. The bill also asks the Government Accountability Office to study the impact of the changes.
Harper earlier this year asked the Financial Services Committee to pass the legislation. “We know from experience that any time there are economic contractions, we can expect credit unions’ liquidity needs to rise,” he said. “Those liquidity needs may spike after the current expiration date of these statutory changes, or they may increase during a future economic crisis. Permanence would provide regulatory certainty for federally insured credit unions during the current crisis and bolster the credit union system’s ability to respond to future emergencies.”
In letters commenting on the temporary changes to the CLF, credit union trade groups also supported making the changes permanent.
“More favorable terms of access to the CLF provide a valuable safety net to support this activity and would—if permanently extended by Congress—bolster the resilience of the industry to future liquidity shocks,” Andrew Morris, the National Association of Federally-Insured Credit Union’s senior counsel for research and advocacy, wrote in a letter to the NCUA earlier this year.
A Credit Union National Association official echoed those sentiments. “We believe it is important to ensure such changes are in place prior to any future stress on the industry to avoid scrambling to make such (temporary) changes during a time of crisis,” Luke Martone, CUNA’s senior director of advocacy wrote in a letter to the agency.