MDI Credit Unions Play A Critical Role In Fostering Financial Inclusion

June 2020
MDI Credit Unions Play A Critical Role In Fostering Financial Inclusion

Board Action Bulletin

NCUA to Distribute $171.3 Million to Southwest Corporate Capital Holders

ALEXANDRIA, Va. (June 25, 2020) – Using a live audio webcast, the National Credit Union Administration Board held its fifth open meeting of 2020 today and approved two items:

  • A request for information on strategies for using digital technology to support the agency’s examination and supervision program; and
  • A final rule that makes several of technical amendments and corrections to the agency’s rules and regulations.

The Office of Credit Union Resources and Expansion briefed the NCUA Board on the financial performance of minority credit unions and the agency’s efforts to preserve and promote the formation of minority depository institutions in 2019.

The NCUA Board also received a briefing from NGN Division staff and the President of the Asset Management and Assistance Center on the financial performance of the NCUA Guaranteed Notes and the asset management estates that comprise the agency’s Corporate System Resolution Program.

Report Details NCUA’s Efforts to Preserve and Support Minority Credit Unions

The NCUA Board was briefed on the financial condition of minority credit unions in 2019 and the agency’s efforts to preserve and promote the formation of minority depository institutions, as detailed in the agency’s annual report to Congress that was released on June 19.

“Financial inclusion is a long-standing priority for my chairmanship of the NCUA, and a key part of this effort is the NCUA’s work to help MDI credit unions grow and thrive,” NCUA Chairman Rodney E. Hood said. “The NCUA has and will continue to find more avenues of support for these institutions so much-needed capital can flow into overlooked or underserved areas. At its heart, financial inclusion means expanding access to safe and affordable financial services for unbanked and underserved people and communities as well as broadening employment and business opportunities. Each one of us has a stake in this outcome. Therefore, we must all work together.”

At the end of 2019, the NCUA regulated or supervised 514 federally insured credit unions with the MDI designation in 36 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. MDI credit unions served more than 3.9 million members and had assets of $40.5 billion. Approximately 10 percent of all federally insured credit unions are MDIs. These institutions are generally small, with 57 percent having less than $10 million in assets.

Through the NCUA’s MDI Preservation Program, MDI credit unions have access to grants and loans, training and technical assistance, and guidance from their examiners. In 2019, the NCUA:

  • Chartered one new MDI credit union, Otoe-Missouria in Red Rock, Oklahoma;
  • Provided 58 low-income-designated MDI credit unions with $738,000 in technical assistance grants; and
  • Provided three MDI credit unions with $75,000 in grants under the agency’s MDI Mentoring Program.

The NCUA’s 2019 Annual Report to Congress on Preserving Minority Depository Institutions was submitted to Congress in accordance with Section 308 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 and Section 367 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. It is available on the agency’s website.

Feedback Requested to Assist Further Modernization of Examination Program

The NCUA Board unanimously approved a request for information on how the agency can take advantage of new and emerging data and technology to support a further modernization of the agency’s examination and supervision functions.

“I am pleased to hear that we are taking strides in researching ways to modernize our largest function here at the NCUA, the examination and supervision program,” Chairman Hood said. “While evaluating the safety and soundness of the credit unions we insure is a necessary process, reducing the burden on credit unions while maintaining our effectiveness, sounds like a win-win for all parties involved.”

Recent events, including the COVID-19 pandemic, have shown that adopting modern technology makes credit unions more resilient to financial and economic shocks and operational distributions. Additionally, these events have demonstrated that many rural, minority, and underserved communities have limited financial options available to them.

The NCUA will use stakeholder responses to:

  • Refine a strategy for leveraging technology in the future examination and supervision process;
  • Determine how much onsite activity would still be required with an examination done primarily offsite; and
  • Develop an implementation strategy that reduces regulator and examination burdens while maintaining the agency’s ability to determine whether federally insured credit unions are operating in a safe and sound matter, and in compliance with all applicable laws and regulations.

Comments related to this request for information must be received 60 days after its publication in the Federal Register.

Southwest Corporate Capital Holders to Receive Distribution in July

The President of the NCUA’s Asset Management and Assistance Center and staff from the agency’s NGN Division briefed the NCUA Board on the financial performance of the NGN program and the asset management estates of five corporate credit unions that failed in 2009 and 2010 during the financial crisis.

During the briefing, the AMAC President stated that the performance of the asset management estates means that the liquidating agent for Southwest Corporate Federal Credit Union will be able to distribute $171.3 million to member capital account holders in July.

“Today’s briefing is a success story culminating from the efforts of NCUA and credit union leadership in those times,” Hood said. “This is really a shared victory. The credit union movement can be proud of its resilience and commitment demonstrated to the system of cooperative credit, while NCUA leadership and staff can take pride in efficiently managing these assets to maximize recoveries.”

The Southwest Corporate asset management estate has 1,120 member capital account holders, including 1,092 credit unions, with a total claim of $403.5 million. After accounting for mergers, purchases and acquisitions, and liquidations, almost 900 active credit unions will receive a distribution.

The NCUA plans to send letters to distribution recipients notifying them of their amount and other payment details. The distribution will be made to credit unions generally through an electronic funds transfer. The payout is planned for July. The NCUA will work with each non-credit union recipient to ensure timely receipt of the payout.

Additional information on the distribution is available on the NCUA’s website.

Board Approves Technical Amendments to NCUA’s Rules and Regulations

The Board unanimously approved several technical amendments to the NCUA’s regulations. These amendments include several changes to correct minor errors and inaccurate citations throughout the NCUA’s regulations.

Because these changes are technical and do not substantively affect federally insured credit unions, they are being issued as final rules.

The final rule is effective upon publication in the Federal Register, except for the amendments to the final rule published at 80 FR 66626, which are effective on January 1, 2022.

The NCUA tweets all open Board meetings live. Follow @TheNCUA on Twitter, and access Board Action Memorandums and NCUA rule changes at www.ncua.gov. The NCUA also live streams, archives and posts videos of open Board meetings online.

Last modified on
06/25/20