Despite recent headwinds, including high-profile bank failures, the credit union movement is still safe and sound, says Rodney Hood, NCUA board member and immediate past chairman.

“We’re not seeing the contagion like at other financial institutions,” says Hood, who addressed the 2023 CUNA Finance Council Conference Monday via livestream.

The Silicon Valley Bank (SVB) crisis was one of confidence, he says. Ninety-percent of SVB’s deposits were uninsured. In comparison, more than 91% of credit union deposits are insured.

“We don’t have those entanglements,” Hood says. “That bodes well for our future.” 

He lauded America’s 4,800 credit unions for growing membership to 135 million, assets to $2.2 trillion, and loans to $1.5 trillion.

“You’re making loans safely and soundly, with low delinquency and charge offs,” Hood says.

He cited several areas of focus for NCUA:

• Balance sheet management. The agency will examine credit unions’ duration risk and efforts to mitigate liquidity and interest-rate risk.

“We’ll be risk focused and principles based,” Hood says. “Expect to hear more from us about balance sheet management.”

• The London Interbank Offered Rate (LIBOR) transition. LIBOR is a key benchmark for setting interest rates for adjustable-rate mortgages, corporate debt, private student loans, and other types of loans. Although many credit unions use U.S. Treasury indices, NCUA examiners will require credits unions to identify any LIBOR exposures and provide a plan to transition to alternative reference rates.

“You can use whatever index makes sense to you,” Hood says.

• Liquidity risk. Many credit unions have loan-to-share ratios that exceed 80%. Hood stressed the need for credit unions to build a relationship with a Federal Home Loan Bank and the Central Liquidity Facility to ensure proper levels of liquidity.
• Current expected credit losses (CECL). Hood opposed the implementation of CECL, calling it “a solution in search of a problem.” The agency allowed credit unions to phase in CECL over three years.

“While we have inflation, geopolitical pressures, and banking sector contagion, we’re staying vigilant,” he says. “We want to give you the flexibility you need to serve members and remain vibrant.” 

Hood’s term on the NCUA Board will expire in August.