Chairwoman Waters, Ranking Member McHenry, and Members of the Committee: Thank you for the opportunity to provide an update on the safety, soundness, and diversity of federally insured credit unions and the NCUA’s efforts during the ongoing COVID-19 emergency.
Our nation’s credit union system was well-capitalized at the start of the pandemic and remains so today, with high levels of net worth and ample liquidity. This strength has allowed credit unions to adapt to the operational challenges resulting from the pandemic.
Total assets in federally insured credit unions rose 15 percent over the year ending in the second quarter of 2020 to $1.75 trillion. Credit union shares and deposits rose by nearly 17 percent, to $1.49 trillion.
Since mid-March, the NCUA has worked diligently to provide credit unions with regulatory relief and much-needed flexibility so they can continue to safely serve their member-owners. We’ve also adjusted our examination program to protect our staff, and we all continue to work remotely and effectively.
We continue to examine for compliance with the Bank Secrecy Act and potential cybersecurity risks, helping to ensure our credit union system remains secure and resilient.
We’ve issued 11 interagency statements and 20 guidance letters to the industry to date, helping credit unions to address emerging risks and implement the regulatory and statutory changes that have been made in response to the pandemic.
The NCUA has provided over $3.7 million in technical assistance to small, low-income, and minority credit unions in the form of its 2020 Community Development Revolving Loan Fund allocation, which went directly to COVID-19 assistance.
State of the Credit Union System
The credit union system’s net worth increased 6.8 percent, over the year to $182.9 billion. The aggregate net worth ratio for the system stood at 10.46 percent, well above the 7 percent statutory requirement.
The Share Insurance Fund is also strong and the equity ratio remains well within the statutory range under the Federal Credit Union Act. Accordingly, we believe there’s no need to assess a premium at this time.
Credit unions have continued to provide needed credit and financial services, with lending rising to all-time high of $1.5 trillion in all major loan categories.
Credit unions collectively extended $8.4 billion in loans under the SBA’s Paycheck Protection Program, with an average loan amount of $49,000.
Like capital, liquidity is a pillar of strength and the bedrock upon which the safety and soundness of the credit union system rests. Congress’ decision to increase the flexibility of, and borrowing authority for, the Central Liquidity Facility in the CARES Act has contributed greatly to bolstering the availability of liquidity in the system.
Since the Act was signed into law, the NCUA has successfully encouraged natural person and corporate credit unions to join the CLF. Today, the facility’s borrowing capacity has exceeded $32 billion and provides access to nearly 80 percent of all credit unions.
I am indeed grateful that Congress provided this much-needed authority in the CARES Act. However, I respectfully request that these changes be extended for the pandemic’s duration so the credit union system and the NCUA can respond effectively should the need for emergency liquidity arise.
Financial Inclusion & ACCESS
One important lesson from 2020 is the need for greater financial inclusion. Lamentably, recent events have revealed many inequities in our society, not the least of which is that the pandemic has had a more deleterious impact on communities of color.
At the NCUA, we are proud of the fact that diversity, equity, and inclusion are part of who we are and how we do business, and Section 342 of Dodd-Frank has been a catalyst for growth and change. Indeed, we have made tremendous progress in this area over the last decade in terms of recruitment, employee retention, and procurement.
Since becoming the 11th Chairman of the NCUA, I have made financial inclusion a priority within the agency and the credit union system as a whole. I recently reinforced that commitment with the launch of a new financial inclusion initiative called ACCESS: Advancing Communities through Credit, Education, Stability & Support.
This initiative will refresh and modernize regulations, policies, and programs that all support greater financial inclusion within the agency and the credit union system, and will address the specific needs of diverse communities.
I look forward to partnering with the Members of this Committee towards this worthy endeavor.
In closing, I’d like to thank the Committee again for the opportunity to appear before you today. I look forward to answering your questions.