President Bush Enacts Deposit Insurance Reform
Alexandria, VA., Feb. 17, 2006 - President George W. Bush recently signed into law two related pieces of legislation that amend the share insurance coverage provided by National Credit Union Administration (NCUA) through the National Credit Union Share Insurance Fund (NCUSIF) and the deposit insurance coverage provided by the Federal Deposit Insurance Corporation (FDIC).
NCUA must promulgate regulations to implement these statutory changes, which NCUA intends to do as quickly as possible. Below are highlights of the upcoming changes to NCUA’s share insurance coverage and information as to what federally-insured credit unions can expect in the near future.
- For most accounts, the current insurance maximum of $100,000 will remain the same for now. Beginning in 2010, and each subsequent 5-year period thereafter, NCUA and FDIC will jointly consider if an inflation adjustment is appropriate, and in what amount, to increase that insurance maximum.
- NCUSIF coverage on certain retirement accounts such as individual retirement accounts (IRAs) and Keogh accounts will increase from $100,000 to $250,000 per account immediately upon NCUA promulgating regulations to implement these statutory changes. These accounts will also be subject to the inflation adjustment discussed above.
- NCUA’s current rules provide share insurance coverage for deferred compensation plans. The statutory amendments provide NCUSIF pass-through coverage to any employee benefit plan, but limit the acceptance of shares in employee benefit plans to NCUSIF-insured credit unions that are “well capitalized” or “adequately capitalized.”
- NCUA will revise its “official sign,” which indicates a credit union’s shares are federally-insured, by including, among possible other things, a statement that federally-insured share accounts are backed by the full faith and credit of the United States Government.
- Although not required to be made part of an agency rulemaking, the statutory amendments require NCUA and FDIC to conduct a study and report to Congress within 12 months of the enactment of the statutory amendments regarding the feasibility of certain changes to the federal share and deposit insurance systems.
NCUA anticipates issuing a Letter to Credit Unions in the near future to provide more details about the above information. As noted, NCUA intends to promulgate implementing regulations as quickly as possible.
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