NCUA Chairman Todd M. Harper Statement on the Central Liquidity Facility’s Budget for 2024

As Prepared for Delivery on December 14, 2023

Thank you, Anthony and Tim, for your presentation and the work of your team in bringing this request to fund the Central Liquidity Facility in 2024 before the NCUA Board. Tim, I understand that this presentation was your first time presenting at the Board table. You did a fine job.

The NCUA Board, in its statutory capacity as the CLF’s executive body, must approve the CLF’s budget. In prior years, the CLF’s expenditures were accounted for in the NCUA operating budget. However, this request for approval of the CLF budget reflects the NCUA Board’s recent decision to strengthen the overall independence of the CLF. In doing so, we separated the CLF budget from the NCUA operating budget.

As Anthony noted, the requested 2024 CLF budget is a hair under $2.2 million. The proposed budget is also reasonable and proportional to the needs of the CLF. Moreover, the financial spending plan prepares for potential contingencies should demand for liquidity advances rise in the next twelve months. As such, I will support this staff budget recommendation.

In the current economic environment of higher interest rates and heightened liquidity risks for credit unions, including several with more than $1 billion in assets, the role of the Central Liquidity Facility as a liquidity backstop has assumed even greater importance. There’s an age-old axiom: “There’s strength in numbers.” That’s especially true here because the more members the CLF has, the more effective it becomes as a liquidity facility.

Over the last eleven months, the CLF has added 52 new members. The addition of these new members has increased the CLF’s capacity to a total of $20.1 billion. That’s welcome news considering the nearly $10 billion contraction that occurred late last year when the temporary statutory enhancements expired. And the facility is working as it should. In fact, the CLF recently made an advance to a member credit union to address liquidity needs.

While the facility is growing in capacity, the congressional restoration of the recently expired CLF statutory enhancements — like the agent-membership provisions for corporate credit unions to serve a subset of their members — would serve the system well. That’s why the NCUA Board continues to call upon Congress to reinstate these provisions, which the Congressional Budget Office has scored as costing the taxpayer nothing. And such legislation would better enable the CLF to serve as a shock absorber for future liquidity events within the credit union system.

Even so, and especially now, the CLF remains a beneficial tool. Access to the CLF or another federal liquidity backstop should be part of any credit union’s broader liquidity risk management plans for a variety of contingencies, not merely during times of crisis. The industry must always prepare for a rainy day, and the CLF is an effective way to do so.

Again, I will support this budget. That concludes my remarks. I now recognize Vice Chairman Hauptman.