Reforming the NCUSIF is a legislative priority for NCUA

by Keith Leggett

In its draft 2014 – 2017 Strategic Plan, the National Credit Union Administration (NCUA) identified one of its legislative priorities as “[i]mproving NCUA’s ability to manage the NCUSIF by providing more flexibility in setting the normal operating level and building retained earnings for the NCUSIF in a manner consistent with the size and complexity of the credit union industry and financial stability goals.”

The Federal Credit Union Act defines the normal operating level as an equity ratio specified by the Board, which shall be not less than 1.2 percent and not more than 1.5 percent. The NCUA Board is currently setting the normal operating level at 1.30 percent of insured deposits (shares).

NCUA is also required distribute excess funds from the NCUSIF, if the NCUSIF equity ratio is greater than the normal operating level and the available assets ratio is above 1 percent. This assumes that all borrowings from the Federal government had been repaid with interest.

But what does it mean to provide more flexibility in setting the normal operating level and to build retained earnings for the NCUSIF in a manner consistent with the size and complexity of the credit union industry?

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