trending Market Intelligence /marketintelligence/en/news-insights/trending/szm-fst2li54f1vonr4diw2 content esgSubNav
Log in to other products


Looking for more?

Contact Us
In This List

Reduction in operating level could equate to more rebates for credit unions


Banking Essentials Newsletter: May Edition


Latin American and Caribbean Market Considerations Blog Series: Focus on IFRS 9


Banking Essentials Newsletter: April Edition - Part 2


The Evolution of Cloud Banking: Successful Implementation & Frameworks

Reduction in operating level could equate to more rebates for credit unions

The National Credit Union Administration board approved a decrease in the normal operating level of the share insurance fund, perhaps paving the way for additional distributions to credit unions.

At its Dec. 13 meeting, the board lowered the level from 1.39% to 1.38%, effective immediately. The level is the equity ratio set by the NCUA that determines when the agency will make a distribution of excess equity from the fund.

Under the Federal Credit Union Act, the NCUA can set the normal operating level between 1.20% and 1.50%.

At its February board meeting, the NCUA approved a $735.7 million dividend payment to credit unions from the share insurance fund. That action came on the heels of the board voting in September 2017 to close the corporate credit union stabilization fund.

In conjunction with the closing of the stabilization fund, the NCUA also raised the normal operating level of the share insurance fund to 1.39% from 1.30%. In doing so, some in the industry believe the regulator held back some funds that could have been returned to credit unions.

NCUA Chairman J. Mark McWatters at the Dec. 13 meeting said the board made a commitment in September to look at the ratio every year. "I think some people looked at that and sort of rolled their eyes and said, 'Yeah, sure you will,'" he said. "I'm not sure what it will be a year from now. We'll just have to see."

Board member Rick Metsger said he realizes that the action will result in credit unions believing that additional dividends could be coming in 2019, and he did not rule it out. "That is possibly true," he said.

The National Association of Federally-Insured Credit Unions, an industry trade group, immediately released a statement saying it will continue to fight for a lowering of the level back to 1.30% so credit unions can realize the fullest distribution possible. "This decrease is a positive development," said NAFCU Chief Economist and Vice President of Research Curt Long. "We will continue to press the NCUA to reduce the NOL for further distributions."