CUNA encouraged NCUA to analyze ways regulations governing non-member deposits could be improved without posing additional risk, given the significant benefits such changes would provide. CUNA President/CEO Jim Nussle wrote to NCUA Chairman J. Mark McWatters and board member Rick Metsger to follow up on recent meetings between agency staff and CUNA’s Small Credit Union Committee.

NCUA regulations state that credit unions cannot accept non-member deposits at a level greater than 20% of total assets, or $3 million. Exceptions to exceed those limits can be permissible of the financial condition and management are sound and the credit union’s plan for the fund is reasonable.

“Recognizing the fact that some credit unions have in the past exceeded existing thresholds, we support any adjustments to limits or rules that would include safeguards and education for credit unions that leverage non-member deposits in their operations to protect both the insurance fund and the credit unions themselves,” Nussle wrote. “Still, we feel there are adjustments that could be made that would benefit small credit unions while not posing additional risk.”

CUNA suggests the following areas be considered should NCUA take up this issue:

• Addressing regulatory consistency across regions: Currently, regional directors can determine whether a credit union can exceed current regulatory limits on non-member deposits. Consistency will improve understanding of the approved limits, while also providing clarity and ease of administration for regional directors;
• Analyzing the appropriate level for the cap on assets: CUNA encourages analysis of whether the current cap of 20% of assets provides enough flexibility to small credit unions, particularly low-income credit unions, to access outside resources to serve their members. A slight upward adjustment with continued oversight by NCUA would allow many small credit unions to lend to more members and, importantly for soundness, to strengthen their bottom lines;
• Supporting the mission of low-income designated credit unions: Small credit unions with high percentages of low-income and disadvantaged members have more difficulty generating the deposits needed to establish a robust, sustainable loan portfolio. Low-income credit unions in particular could significantly benefit from support from other federally-insured credit unions; and
• Classifying federally insured credit unions as non-members: CUNA encourages NCUA to assess whether exempting federally-insured credit unions from the definition of a “non-member” would safely allow more federally-insured credit unions to help other federally-insured credit unions. As potential benefits, those credit unions with excess liquidity would have an insured institution to invest their money, while the receiving institutions would have greater ability to serve their members and communities.