NCUA Chairman Todd M. Harper Statement on the NCUA’s Proposed Rule to Simplify Share Insurance Requirements

As Prepared for Delivery on October 19, 2023

Thank you, Rachel, for your briefing and work in bringing this proposed rule to the NCUA Board today. Although he is not here, Tom Zells deserves recognition for his work as well.

Additionally, thank you to the staff from the offices of the Chief Economist, Credit Union Resources and Expansion, Examination and Insurance, General Counsel, Consumer Financial Protection, and National Examinations and Supervision, as well as staff from the NCUA’s Asset Management and Assistance Center and our three regional offices for the work on this proposed rule. This interaction and consultation across many NCUA organizational silos has produced a better proposed rule.

Deposit insurance at federally insured credit unions and banks is the cornerstone that secures the foundation of our nation’s vibrant credit union and banking systems. The confidence created by knowing savings are protected by the full faith and credit of the United States allows consumers to rest easy, knowing their hard-earned nest eggs up to the current limit of $250,000 will be safe even during periods of financial and economic stress.

We saw this concern with the collapse of Silicon Valley Bank, Signature Bank, and First Republic earlier in the year. Between March 13 and March 30, website traffic to Share Insurance Fund information on NCUA.gov and MyCreditUnion.gov increased 24 percent and 77 percent, respectively. And, the NCUA’s Consumer Assistance Center and Office of Credit Union Resources and Expansion received more than 6,300 calls from credit union members and consumers who had questions about share insurance coverage. The NCUA’s team did a great job responding to questions and providing consumers and the public with the needed information.

To maintain this vital fortification of our nation’s financial system and ensure a level playing field for credit unions and banks to compete, the federal insurance coverage provided by the National Credit Union Share Insurance Fund and the FDIC’s Deposit Insurance Fund should align to the greatest extent possible. The proposed rule before us would, therefore, make changes to the provisions for trust accounts and mortgage servicing accounts to align the NCUA’s regulations with changes the FDIC adopted in 2022. Those changes take effect on April 1, 2024.

As noted in Rachel’s presentation, this proposed rule would:

• Simplify the NCUA’s share insurance regulations by establishing a single “trust accounts” category that would provide for coverage of funds of both revocable and irrevocable trusts deposited at federally insured credit unions in the accounts of members or those otherwise eligible to maintain insured accounts;
• Provide consistent share insurance treatment for all mortgage servicing account balances held to satisfy principal and interest obligations to a lender; and
• Apply more flexible recordkeeping requirements to explicitly allow the NCUA to look to records held in the normal course of business that are maintained by parties other than a federally insured credit union and its members.

Those are good changes, and I will support this rule. But, Rachel, I still have a few questions for you. It has been the agency’s goal to verify member shares and pay those out within three to five business days of liquidating a federally insured credit union. How will this proposed rule affect or improve the agency’s ability to meet that performance goal going forward?

Thank you, Rachel, for clarifying that this proposed rule could reduce the time needed for the NCUA’s Asset Management and Assistance Center to complete share insurance determinations and payments at liquidated credit unions.

My next question involves the potential effects on state law. Will the changes we are contemplating have any effects on laws related to trusts at the state level?

Thank you for clarifying that this proposed rule has no impact on state law. My next question is on the issue of pre-existing exemptions and whether they will, if this proposed rule is finalized as drafted, continue in effect. Are there exemptions in this proposed rulemaking? Can you explain?

Thank you for that response. It appears the agency has balanced implementation considerations with the need for consumers to understand the implications of this rule on their individual financial situation. I encourage commenters to weigh in on this issue as well.

Lastly, although it’s not in the proposed rule itself, it’s my understanding that it will be easier for the NCUA and federally insured credit unions to verify insured shares at credit unions under this proposal. If the proposed rule is finalized as drafted, would we see greater accuracy and an increase in percentage of insured deposits for the industry?

Thank you, Rachel. And again, solid work on this proposed rule by you and the rest of the NCUA team.

In closing, this proposed rule gives credit union members and members of the public who use trust accounts for the transfer of ownership of assets the same level of protection, whether the accounts are maintained at federally insured credit unions or other federally insured depository institutions. That’s good public policy.

That concludes my remarks. I now recognize the Vice Chairman for his comments and questions.