Credit Union Regulatory Guidance Including: NCUA, CFPB, FDIC, OCC, FFIEC

Samantha: Hello, this is Samantha Shares.

This episode covers N C U A Chairman
Todd Harper's Written Testimony Before

the House Financial Services Committee

The following is an audio
version of that testimony.

This podcast is educational
and is not legal advice.

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And now the testimony.

N C U A Chairman Todd Harper's
Written Testimony Before the

House Financial Services Committee

Chairman McHenry, Ranking Member
Waters, and members of the committee,

thank you for the invitation to
discuss the operations, programs, and

initiatives of the National Credit
Union Administration (N C U A).

In today’s testimony, I will discuss
the current state of the credit

union system; the agency’s efforts
to maintain its safety and soundness,

protect the consumers who use credit
unions, advance economic opportunity;

the N C U A’s response to Hurricanes
Helene and Milton; and several of

the N C U A’s legislative requests.

State of the Credit Union System

Overall, the credit union system remains
strong, although there are some warning

signs of potential weaknesses that
the N C U A is closely monitoring.

Namely, the agency is seeing growing
signs of weak loan performance, declining

capital levels, rising delinquency
rates, and lower earnings across the

system and at specific institutions.

Credit Union System Performance

As of June 30, 2024, federally insured
credit unions’ aggregate net worth

ratio was 10.84 percent, an increase
of 22 basis points over the year.

Year-over-year growth in
assets and lending continued,

albeit at a slower pace.

For the first time since 2008,
quarter-to-quarter asset growth was

negative; however, the total assets of
the credit union system nearly reached 2.3

trillion dollars, while total outstanding
loans exceeded 1.6 trillion dollars.

Year-over-year share growth
remains positive, even after

negative quarter-to-quarter
share growth in June 2024.

Like negative asset growth, declining
total shares were last seen during 2008.

The industry’s return on average assets
has slowed compared to one year earlier

but remains sound at 0.69 percent.

The net interest margin has also
increased to near the levels prior to

the most recent rise in interest rates.

Credit loss reserving expense has
increased given relatively high and

rising loan delinquency and charge-offs.

Consumer financial stress
continues to flow through credit

unions’ loan performance data.

The delinquency rate for total loans
and leases rose to 0.84 percent in the

second quarter of 2024, nearing the
level last observed in December 2014.

Meanwhile, the rolling 12- month
net charge-off rate climbed to 0.79

percent, marking the highest rate
since mid- 2012, when consumers were

recovering from the Great Recession.

Despite the deterioration in loan
performance and earnings, net worth

levels indicate the credit union system
generally remains resilient and liquidity

appears to have stabilized during 2024.

We, however, continue to see the
effects of consumer financial stress

across the system and at specific
institutions as demonstrated in the

industry’s overall CAMELS composite

ratings.

Approximately one in five federally
insured credit unions has a composite

CAMELS code rating of 3, 4, or 5.

Especially concerning is the increasing
number of complex credit unions with 500

million dollars or more in assets falling
into the troubled category—CAMELS code 4

or 5 ratings—during the second quarter.

The number of troubled complex
credit unions, those with 500 million

dollars or more in assets, tripled
in the second quarter of 2024 alone,

and the amount of assets at these
institutions grew by more than fivefold.

At the end of the second quarter, CAMELS
code 3, 4, and 5 credit unions held

10.01 percent of the industry’s assets.

It has been nearly a decade since
the N C U A last experienced this

proportion of insured shares at risk.

The decline in CAMELS ratings is a
contributing factor to the increase

in the reserves held in the Share
Insurance Fund, which increased nearly

14 percent from 209 million dollars
at the start of 2024 to 231.7 million

dollars at the end of the third quarter.

External Factors Affecting
the Credit Union System

The current economic environment has
posed continuing challenges for some

consumers and many credit unions.

Although inflation has retreated,
the general price level is

higher than a few years ago.

Higher prices, along with
elevated interest rates, have

strained household budgets.

Loan performance has accordingly weakened.

Interest rates have also started
to decrease and are expected to

decline further in the year ahead.

In the near term, however, the
elevated interest rate environment

may deteriorate loan performance
further as adjustable-rate loans

reprice at higher interest rates.

Further, the resumption of reporting
delinquent federal student loans

to credit bureaus will likely lower
credit scores for many borrowers.

These loans were not reported
between September 30, 2023,

and September 30, 2024.

Likewise, commercial real estate
lending, particularly within the

office sector, continues to show
signs of stress because of the

prevalence of hybrid work environments.

While the credit union system has modest
exposure to commercial real estate, the

N C U A continues to monitor twenty-six
individual credit unions with material

exposure to this type of lending.

Share Insurance Fund Performance

Backed by the full faith and credit of
the United States, the National Credit

Union Share Insurance Fund provides
insurance coverage for individual accounts

up to 250,000 dollars at federally
insured credit unions.2 As of June 30,

2024, the Share Insurance Fund insured

1.76 trillion dollars in shares
and deposits and 91.2 percent of

total shares and deposits in the

credit union system.

In comparison, uninsured shares and
deposits equaled nearly 169.4 billion

dollars, or 8.8 percent of total shares
and deposits, as of June 30, 2024.

The Share Insurance Fund
continues to perform well, with

no premiums expected at this time.

As of June 30, 2024, the Share Insurance
Fund reported a year-to-date net income of

154.3 million dollars, a net position
of 21.3 billion dollars, and an

equity ratio of 1.28 percent, which is

below the 1.33 percent normal operating
level set by the N C U A Board.3 Because

of the stress in the credit union
system resulting from liquidity and

interest rate risks, the N C U A has
increased the Share Insurance Fund’s

liquidity position in recent years.

As of June 30, 2024, the Share
Insurance Fund’s overnight investment

balance was 5.7 billion dollars.

The N C U A Board will continue to
closely monitor credit union and Share

Insurance Fund performance and make
needed adjustments to further consumer

confidence within the credit union system.

State of the Central Liquidity Facility

A credit union’s ability to effectively
deal with liquidity risk in all economic

environments, especially during times of
systemic stress and reduced liquidity,

underscores the importance of the N
C U A’s Central Liquidity Facility

(CLF) to individual credit unions
and the broader credit union system.

The CLF currently has 431 credit
union members of varying asset sizes,

representing 9.3 percent of all
institutions within the credit union

system.4 These credit unions have
access to approximately 21.7 billion

dollars in contingent liquidity
funding from this federally backed

source.

Under the N C U A’s regulations,
credit unions with assets of 250

million dollars or more are required
to have access to a contingent federal

liquidity source—the CLF, the Federal
Reserve’s Discount Window, or both—as

part of their contingency funding plan.

Credit unions with less than 250 million
dollars in assets, while not required

to have a membership with a contingent
federal liquidity source, must identify

external sources as part of their
policies or contingency funding plans.

In December 2022, the CLF’s temporary
statutory enhancements that facilitated

the agent membership of corporate
credit unions—credit unions providing

payment and other financial services
to consumer credit unions—expired.5 At

that time 3,323 consumer credit unions
with less than 250 million dollars in

assets, or approximately 67 percent
of all credit unions, lost access to

approximately 27.5 billion dollars in
contingent liquidity through the CLF.

To address this issue, the N C U A
Board has repeatedly and unanimously

asked Congress for permanent statutory
authority to allow corporate credit

unions and other agent members of the
CLF to purchase capital stock for a

subset of the credit unions they serve.

These statutory adjustments will
make the CLF a more affordable

option for corporate credit unions
to subscribe to the CLF on behalf of

their smaller credit union members
while also providing greater access

to liquidity for more credit unions.

The Congressional Budget Oice
has scored the CLF reforms

at no cost to the taxpayer.6

Eforts to Protect and Strengthen
the Credit Union System

The N C U A over the last year has
worked to enhance cybersecurity, promote

the prudent adoption of new financial
technologies, enforce consumer financial

protection laws and regulations, support
minority depository institutions,

advance diversity within the agency
and industry, and strengthen the

resiliency of the credit union system.

Enhancing Cybersecurity

Overall, 442 credit unions with more
than 1 billion dollars in assets

hold 77.2 percent of industry assets.

As a result of this concentration, a
cybersecurity vulnerability at a large

credit union may threaten the safety
and soundness of the entire system.

Moreover, cybersecurity threats within the
interconnected financial services industry

remain high and show no signs of abating.

The N C U A, therefore, is fully committed
to enhancing its cybersecurity examination

program and related activities.

Last year, the N C U A deployed
its updated, scalable, and

risk-focused Information Security
Examination (ISE) procedures.

The ISE examination provides examiners
with standardized review steps to

facilitate data collection and analysis.

The N C U A also continues to expand
its partnerships with the Cybersecurity

and Infrastructure Security Agency and
the Federal Bureau of Investigation to

support credit unions, especially as the
number of ransomware incidents increase.

In addition, the N C U A’s cyber incident
reporting rule that went into effect on

September 1, 2023, requires a federally
insured credit union to report a cyber

incident to the agency as soon as
possible but no later than 72 hours after

the credit union reasonably believes a
reportable cyber incident has occurred.

The N C U A uses this information
to understand potential cyber

threats to the credit union system
and to provide recommendations to

protect credit union and member
information.7 After one year, the

N C U A has received more than
1,000 reportable cyber incidents.

The data also shows that 7 out of
10 reportable cyber incidents are

related to credit union vendors,
further underscoring the need for

Congress to reinstate the N C U A’s
third-party vendor examination authority,

which is further discussed below.

The N C U A also provides credit
unions the Automated Cybersecurity

Evaluation Toolbox (A C E T).

This tool allows credit
unions of all asset sizes to

conduct cybersecurity maturity

assessments to measure their preparedness.

The ACET maturity assessment is
voluntary for all credit unions.

Enforcing Consumer Financial
Protection Laws and Regulations

An essential part of the N C U
A’s statutory responsibilities

is to examine credit unions with

10 billion dollars or less in assets
for compliance with consumer financial

protection laws and regulations.

The agency’s consumer compliance
oversight ensures the credit union

system not only protects credit union
member-owners from unfair practices or

predatory products but also meets the
saving and credit needs of its members,

especially those of modest means.

In 2024, the agency focused its
attention on overdraft programs, fair

lending, automobile lending, Truth
in Lending Act requirements, and

Guaranteed Asset Protection insurance.

The N C U A also prioritized
credit union compliance with the

Flood Disaster Protection Act.

The N C U A has also recently
increased visibility into the

overdraft and non-sufficient funds
fees charged by credit unions.

Beginning with the 2024 first quarter
Call Report, the N C U A has required

federally insured credit unions with
more than 1 billion dollars in assets

to separately disclose their income from
overdraft and non-sufficient funds fees.

In addition to promoting transparency,
these Call Report changes allow

credit unions to benchmark their
overdraft programs against their peers.

Separate from the agency’s annual
supervisory priorities for consumer

financial protection, the agency
completes fair lending examinations

at selected institutions.

In the N C U A’s fair lending examinations
conducted in 2023 and 2024, the agency

identified some patterns or practices of:

Discrimination based on age and marital
status, Illegal race-based redlining,

Indirect lending pricing concerns,

Home Mortgage Disclosure Act violations,

Equal Credit Opportunity Act
notification and government

monitoring information violations,

Servicemembers Civil
Relief Act violations, and

Instances of inadequate fair lending
compliance management systems.

The N C U A’s fair lending efforts aim
to create a financial system that works

for all Americans, regardless of their
race, ethnicity, age, sex, orientation,

marital status, religion, or disability.

By working to enforce fair lending and
consumer financial protection laws, the N

C U A is ensuring that the American system
of cooperative credit remains faithful to

its mission of “people helping people.”

In 2024, the N C U A referred
six credit unions to the U.S.

Department of Justice for illegal
age discrimination, one for age

and marital status discrimination,
and one for race-based redlining.

These referrals have affected over 23,000
consumers, and associated remediation

expenses exceeded 500,000 dollars.

Separately, the U.S Department of
Justice announced in October the first

ever race-based redlining settlement
against a federally insured credit union.

In February of this year, the N C
U A also joined with other Federal

Financial Institution Examination
Council (FFIEC) agencies to issue a

statement of examination principles
related to valuation discrimination and

bias in residential real estate lending.

These principles assess whether credit
unions’ compliance and risk management

practices are sufficient to identify
and mitigate discrimination or bias in

their residential real estate valuation

practices.

In July, the N C U A again collaborated
with the other FFIEC agencies

to issue Interagency Guidance on
Reconsiderations of Value (ROV) of

residential real estate valuations.

The guidance offers examples
of ROV policies and procedures

that a financial institution may

implement to help identify, address,
and mitigate discrimination risk.

Also in July, the N C U A, the other
FFIEC agencies, and the Federal Housing

Finance Agency issued the Automated
Valuation Model (AVM) final rule

as required by the Dodd-Frank Wall

Street Reform and Consumer Protection Act.

The rule implements quality control
standards, including a non-discrimination

standard, for A V M’s used by mortgage
originators and secondary market issuers.

Supporting Minority
Depository Institutions

Minority depository institutions
(MDIs) offer safe, fair, and affordable

financial services and products to
minority individuals and communities

that the financial services system
has historically underserved.

At the end of the second quarter of 2024,
there were 490 MDI credit unions—more

than one in ten federally insured
credit unions—collectively serving more

than 6.6 million members and holding
assets of more than 90 billion dollars.

MDI credit unions tend to be smaller
institutions with approximately 183

million dollars in average assets.

Yet, their financial performance measures,
including return on average assets, net

worth ratio, and net interest margins,
are frequently comparable to and often

exceed those of other credit unions.

In 2022, the N C U A launched the Small
Credit Union and MDI Support Program to

provide these institutions with help on a
range of operational and financial topics.

For 2024, the N C U A allocated 4,600
staff hours across its three regions to

support MDIs through this initiative.

Further, MDI credit unions with a
low-income designation are eligible

for Community Development Revolving
Loan Fund grants and loans.

In the 2024 grant round, 39 MDIs

received nearly 1.4 million dollars
in technical assistance grants.

These grants assist MDIs in remaining
competitive by helping them expand access

to fair and affordable products, offer
new and innovative financial products

and services tailored to the needs of
their members and communities, build

greater internal capacity, and bolster
cybersecurity systems and practices.

Congress authorized all MDIs to be
eligible for Revolving Loan Fund grants

and loans during the 2023 grant round.

However, that authorization was not
extended in the 2024 appropriation,

removing access to the Revolving
Loan Fund for nearly 100 MDIs.

The N C U A accordingly requests
lawmakers reinstate eligibility

for all MDI credit unions.

Promoting Financial Technology

The financial technology industry is
rapidly evolving with developments

to enhance products and services.

To address these developments
the N C U A has recently:

Established a public-facing financial
technology and digital asset webpage;

Updated the share insurance FAQs to
clarify that digital assets do not

qualify for share insurance coverage;

Established office hours to
engage credit unions and financial

technology companies; and

Updated the Credit Union Profile to
collect information about credit unions’

use of financial technology companies.

Based on data collected by the
N C U A, few credit unions use

distributed ledger technology or
offer cryptocurrency services, through

third-party vendors, to their members.

The agency is monitoring the use of these
technologies to ensure proper governance,

risk management, and compliance.

Advancing Diversity, Equity,
Inclusion, and Accessibility

The N C U A is committed to promoting
diversity, equity, inclusion, and

accessibility (DEIA) within the
agency and the credit union system.

The agency advances these principles
through external initiatives, like its

annual DEI Summit, an MDI Symposium, the
statutorily mandated voluntary Credit

Union Diversity Self-Assessment, and
internal efforts such as employee resource

groups (ERGs), outreach to potential
suppliers, and hiring initiatives to

encourage a diverse pool of applicants.

The agency’s Federal Employee
Viewpoint Survey results show that

the N C U A draws strength from
diverse talents and perspectives.

The agency uses data from the survey,
including the DEIA index, to inform its

data-driven strategies and activities.

In 2024, the index revealed that 79.1
percent of N C U A respondents reported

positive perceptions of agency’s
practices related to DEIA, compared

with the government-wide DEIA index

average of 72.8 percent and 76.2
percent for medium-sized agencies.

The N C U A also supports workforce
diversity, equity, inclusion, and

belonging through its training,
outreach, and recruitment; special

emphasis programs; and ERGs.

During fiscal year 2024, 42.5 percent
of N C U A employees were members of

an ERG, putting the N C U A well above
the standard membership goal of 10

percent of an organization’s workforce.

The agency continues building a diverse
talent pipeline to attract, hire,

and retain highly skilled employees.

Since 2017, the N C U A has consistently
exceeded the federal employment goals

for employees with disabilities and
employees with targeted disabilities.

In fiscal year 2024, 17.7 percent
of the agency’s workforce was made

up of individuals with disabilities,
and 4.4 percent of employees reported

having a targeted disability.14

The N C U A supports accessibility
through its hiring efforts,

reasonable accommodations program,
Disability Solutions Desk, and

Section 508 compliance program.

In the General Services Administration’s
2023 report to Congress on compliance

with Section 508 of the Rehabilitation
Act of 1973, the N C U A had a

maturity level of Moderate and a
conformance level of Very High.

The N C U A is also building a
diverse supplier network to obtain

innovative solutions and the best
value for its contract actions,

particularly in information technology.

By fiscal year-end 2024, the agency
awarded 42.2 percent of reportable

contract dollars to minority-owned
or women-owned businesses.

To promote DEIA in the broader credit
union industry, the N C U A provides

credit unions a voluntary diversity
self-assessment tool to measure

their progress in applying DEIA

principles.

The N C U A administers the
self-assessment through a third party

and receives and reports aggregate data
in its Office of Minority and Women

Inclusion Annual Report to Congress.

Rulemaking Activities

During the last two quarters, the N C U A
has pursued several rulemaking activities.

In April, for example, the N C U A
Board issued an advance notice of

proposed rulemaking to improve and
update the agency’s records preservation

program regulation and accompanying

guidelines.

In 2023, the N C U A received
feedback that aspects of Part 749 were

potentially burdensome and unclear.

Based on this feedback, the Board
sought input on whether there was a

need to update Part 749 to ensure that
credit unions continue to properly

preserve records vital to their business
operations, the N C U A’s supervisory

needs, and the needs of their members.

In July, the N C U A Board
approved a proposed rule on

incentive-based compensation as
required by the Dodd-Frank Act.

Specifically, Section 956 of the
Dodd-Frank Act requires that the

appropriate federal regulators
jointly issue regulations or

guidelines prohibiting incentive-based
compensation arrangements at

covered financial institutions that

encourage inappropriate risks by
providing excessive compensation or that

could lead to material financial loss.

These standards must also
require those covered financial

institutions to disclose information
concerning incentive-based

compensation arrangements to the
appropriate federal regulator.

Also in July, the N C U A Board
approved a proposed rule requiring

federally insured credit union boards
of directors to establish, and update

at least annually, written succession

plans for key positions.

A succession plan would be required
to include a credit union’s strategy

for recruiting candidates to each of
the key positions and to promote the

credit union’s safe and sound operation.

The revised proposed rule is based
on a 2022 proposal and includes

several changes based on industry
comments and feedback received.

The lack of succession planning continues
to be cited as a driving factor in

credit union mergers, and the revised
proposal aims to moderate some of

those factors leading to such mergers.

The interagency notice of proposed
rulemaking required by the Financial Data

Transparency Act of 2022 was published in
the Federal Register on August 22, 2024.

This joint proposal serves to promote the
interoperability of financial regulatory

data across the financial regulatory
agencies through the establishment

of data standards for identifiers of
legal entities and other information

collections submitted to the agencies.

Once the interagency rule is
finalized, the N C U A will develop

an agency-specific rule to determine
the applicability of the joint

standards to the collections of
information under its purview.

In September, the N C U A Board approved
a final rule to implement the Fair Hiring

in Banking Act, enacted by Congress in the
2022 National Defense Authorization Act.

As required by Congress, the final
rule allows people with convictions

for certain minor or older offenses
to work in the credit union industry

without applying for the N C U A Board’s

approval.

Section 205(d) of the Federal Credit Union
Act, as amended by the Fair Hiring in

Banking Act, generally prohibits, except
with the prior written consent of the N C

U A Board, a person who has been convicted
of or has a program entry for certain

criminal offenses involving dishonesty
or breach of trust from participating

in the affairs of a credit union.

The final rule addresses the individuals
and types of offenses covered by Section

205(d) and the N C U A’s procedures
for reviewing a consent application.

This final rule also aligns the N C U
A’s regulations with those of the Federal

Deposit Insurance Corporation (FDIC).

Also in September, the N C U A Board
approved a final rule which simplifies the

N C U A’s share insurance regulations by
establishing a “trust accounts” category

to provide coverage of funds in both
revocable and irrevocable trusts deposited

at federally insured credit unions in the
accounts of members or those otherwise

eligible to maintain insured accounts.

The rule aligns the insurance coverage
provided to federally insured credit

union members’ revocable and irrevocable
trust accounts with the coverage provided

to consumers who maintain the same
accounts at federally insured banks.

Hurricane Recovery Eforts

Given the importance of hurricane recovery
efforts to the Chairman and members of

the committee, the N C U A has worked
diligently in recent weeks to respond to

Hurricane Helene and Hurricane Milton.

Hurricane Helene struck the
“big bend” area of the Florida

Panhandle as a Category 3 hurricane on
September 26, affecting several states.

Hurricane Milton followed closely
behind as a Category 3 on October 9

near Siesta Key, Florida, primarily
affecting Florida and Georgia.

Credit unions worked quickly
to resume services, where

possible, at affected branches.

Credit unions also undertook unprecedented
efforts to respond to a need for cash when

the telecommunications needed to operate
credit and debit services broke down.

N C U A staff additionally contacted
113 low-income designated credit

unions in the worst-hit areas to
inform them on how to receive emergency

grants and loans from the Community
Development Revolving Loan Fund.

The N C U A also delayed its examination
and supervision activity and provided

extensions for regulatory filing
deadlines so the management of affected

credit unions could focus on restoring
facilities and services to their members.

Legislative Requests

As the current Congress draws to a
close and lawmakers prepare for a

new Congress, the N C U A suggests
certain statutory changes to better

enable the agency to achieve its
mission to protect the system of

cooperative credit and its member-owners
through effective chartering,

supervision, regulation, and insurance.

Restoring Third-Party Vendor Oversight

Credit unions frequently engage
third-party vendors and credit

union service organizations to
improve operational efficiencies

and enhance member services.

The N C U A’s lack of third-party
vendor oversight remains a significant

regulatory blind spot that has led to
vulnerabilities in the credit union system

and obstacles to effective collaboration
amongst all financial regulatory agencies.

Credit unions holding approximately
90 percent of industry assets use

key services provided by unregulated
third-party service providers, posing

potential risks to financial stability.

Last November, a single third-party
vendor’s cybersecurity incident disrupted

the daily operations of 60 credit unions.

In June, a large credit union with
9.5 billion dollars in assets reported

the personal information of more
than one million current and former

members and employees had been
accessed during a ransomware attack.

The breach initially occurred on May 23,
but the ransomware hackers did not shut

down most of the credit union’s online
and mobile banking systems until June 29.

These incidents highlight a significant
vulnerability to the 2.3 trillion

dollar credit union industry and have
the capacity to debilitate our nation’s

critical infrastructure if left unchecked.

At a minimum, this lack of visibility
impacts credit union safety and

soundness and the Share Insurance Fund.

If Congress were to restore vendor
authority, the N C U A would implement

this oversight through a risk-based
examination program focusing on

services related to safety and
soundness, information security,

cybersecurity, BSA/AML compliance,
consumer financial protection, and

areas posing significant financial
risk for the Share Insurance Fund and

national economic security.

Having this oversight would reduce
N C U A’s requests to credit

unions for intervention when
vendors are experiencing problems.

It would also provide credit unions with
access to N C U A examination summaries

to aid in their due diligence of vendors.

This ability is currently available
to commercial banks, not credit

unions, which places the industry
at a competitive disadvantage.

Independent entities like the Government
Accountability Office, the Financial

Stability Oversight Council, and the
N C U A’s Oice of Inspector General

have all identified this deficiency
as a significant obstacle to the N

C U A’s financial stability mission.

Reforming the Central Liquidity Facility

As discussed earlier in this testimony,
the N C U A Board unanimously supports

a proposed statutory amendment to allow
corporate credit unions to serve as CLF

agents for their member credit unions.

A bipartisan bill introduced in the
first session of the 118th Congress

would enable corporate credit unions
to purchase CLF capital stock on

behalf of a subset of their members.

Specifically, the legislation
would allow corporate credit unions

to contribute capital to provide
coverage for smaller members with

assets under 250 million dollars.

Enacting this legislation would help
insulate the credit union system from

future liquidity events, like those
that occurred in the first half of 2023.

Providing Flexibility for
Administering the Share Insurance Fund

The N C U A further urges Congress to
amend the Federal Credit Union Act to

eliminate restrictions on the Share
Insurance Fund’s equity ratio and on

the agency’s ability to levy premiums.

Such changes would improve fund
management and align the N C U A’s

authority to manage the Share Insurance
Fund with the FDIC’s authority in

maintaining its Deposit Insurance Fund.

Specifically, proposed changes should
remove the restrictions on levying Share

Insurance Fund premiums when the fund’s
equity ratio is equal to or greater

than 1.30 percent and when the premium
charged exceeds the amount needed to

restore the equity ratio to 1.30 percent.

A statutory change should also
eliminate the 1.50 percent ceiling

from the current statutory definition
of the “normal operating level” for

the Share Insurance Fund, which limits
the Board’s ability to increase the

size of the fund above this level.

Together, these amendments would bring
the N C U A’s statutory authority over

the Share Insurance Fund more in line
with the FDIC’s authority as it relates to

administering the Deposit Insurance Fund.

These amendments would also better
enable the N C U A Board to proactively

manage the Share Insurance Fund by
building reserves during economic

upturns so that sufficient money is
available during economic downturns.

A more counter- cyclical approach would
better ensure that credit unions will

not need to impair their one percent
contributed capital deposit or pay

premiums during times of economic
stress, when they can least afford it.

Increase Grant Assistance for the
Community Development Revolving Loan Fund

Grants and loans from the Community
Development Revolving Loan Fund

give eligible credit unions
resources to improve service to

their members and stimulate economic
development in their communities.

Through its stewardship of the Revolving
Loan Fund, the N C U A provides funds

to these credit unions for various
initiatives approved by the agency’s

Board, including expanding outreach
to underserved populations, improving

digital services and cybersecurity,
enhancing staff training, and

facilitating capacity-building efforts.

Maintaining a long-running trend,
the N C U A’s ability to fulfill

grant requests continued to be
surpassed in the 2024 grant round.

The agency received 271 applications
requesting more than 8.3 million

dollars but was only able to
fund about 3.5 million dollars

in grants to 135 credit unions.

The N C U A, therefore, requests
Congress increase the Revolving

Loan Fund appropriation to 10
million dollars to keep up with

the growing demand for requests.

The Revolving Loan Fund has a long
and successful track record as an

effective way to provide essential
resources to low-income credit unions.

Conclusion

In sum, the N C U A will continue
to oversee credit union performance

and coordinate with other federal
financial institution regulators, as

appropriate, to ensure the overall
resiliency and stability of our nation’s

financial services system and economy.

Congress can further these efforts
by adopting the legislative

changes suggested above.

Thank you again for the
invitation to testify.

I look forward to working with
the committee to safeguard and

strengthen the credit union system.

This concludes the testimony

If your Credit union could use assistance
with your exam, reach out to Mark Treichel

on LinkedIn, or at mark Treichel dot com.

This is Samantha Shares and
we Thank you for listening.