NCUA Seeks Comments on Share Insurance Fund’s Normal Operating Level

The NCUA Board issued a notice and request for comment on the methodology used to set the National Credit Union Share Insurance Funds (NCUSIF) normal operating level.

The current policy for setting the normal operating level was adopted in 2017, and it established periodic reviews by NCUA staff of the equity needs of the Share Insurance Fund. This policy also requires any change to the normal operating level of more than one basis point to be made only after a public announcement of the proposed adjustment and an opportunity for comment.

The normal operating level differs from the equity ratio, as it is the NCUA Board’s desired equity level for the Share Insurance Fund. Per the Federal Credit Union Act, the NCUA Board sets the normal operating level between 1.20% and 1.50%. The main purpose of the normal operating level is to ensure continued confidence in federal share insurance, prevent impairment of the one percent contributed capital deposit, and ensure the Fund can withstand a moderate recession without the equity ratio declining below 1.20% over a five-year period.

The specific questions that the NCUA is looking for feedback on are:

  • Should a moderate recession be the basis for evaluating the Insurance Fund performance during an economic downturn, or should the NCUA change the policy to consider a severe recession?
  • What data source(s) should the NCUA use for determining the characteristics of a potential moderate or severe recession — the Federal Reserve scenario, an independent source, or the NCUA’s judgment?
  • Should the NCUA continue modeling the performance of the Insurance Fund over a five-year period or a longer (or shorter) period?
  • How should the NCUA utilize the modeled potential decline in value of the Insurance Fund’s claims on the corporate asset management estates going forward until the estates are fully resolved?
  • Should the NCUA continue to incorporate in the Normal Operating Level analysis the projected equity ratio decline through the end of the following year without an economic downturn? Should this period be longer or short, or not factored into the analysis at all.
  • Given forecasting uncertainties and timing challenges, would it be reasonable for the NCUA to change the requirement to request public comment only if the Normal Operating Level were to change by a larger amount than just one basis point?
  • Should the Normal Operating Level be re-evaluated in the midst of an economic downturn or should it be left unchanged until the onset of an economic recovery?
  • Should the Normal Operative Level be re-evaluated on qualitative factors based on the COVID-19 pandemic?
  • Is there any other information that the NCUA Board should consider when setting the NOL?

Question of the Week

Q. If a stop payment order is placed through online services, a telephone banking product, or over the phone, is a signature required on a physical stop payment form?

A. No. Stop payment orders are effective with or without a writing. However, if a member provides a verbal stop payment, it iseffective for 14 days, if it is not confirmed in writing within the 14 days. The confirmed order is good for six months from the date of the oral order.

If the member provides a written stop payment order, it is effective for six months. A stop payment order may be renewed for an additional six-month period if a written request is received within the initial six-month period. Additionally, the member must provide the credit union with enough time to be able to stop the payment. This means a stop payment notice received after the item has already been processed is ineffective.

Related Links

IDS 28-4-403
ORS 74.4030
RCW 62A.4-403

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Questions? Contact the Compliance Hotline: 1.800.546.4465; compliance@nwcua.org.

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