Nonmember deposits enhance growth for CUs

July 25, 2019

CUNA filed a comment letter Wednesday in support of NCUA’s proposed rule on public unit and nonmember shares (referred to as nonmember deposits).

The proposal would replace the current nonmember deposit limit of the greater of 20% of total shares or $3 million with a limit of 50% of the difference of paid-in and unimpaired capital and surplus, less any public unit and nonmember shares. The change provides a uniform limit for two alternative funding sources (i.e., borrowings and public/nonmember shares) that are functionally equivalent but that currently have different limits.  It also would give some credit unions more flexibility in accepting public unit and nonmember deposits.  

CUNA supports the purpose of the NCUA’s nonmember deposit rule. Nonmember deposits are useful to credit unions as they provide alternative sources of funding, can be lower cost than member deposits, are often a more stable source of funding than borrowing, strengthen an FCU’s relationship with political subdivisions, public units, or other charitable or economic development organizations, and provide a funding option that does not require tying up outside lines of credit.

The letter highlights some other concerns such as the potential harm removing the $3 million alternative cap could have on some credit unions currently taking advantage of it. To address this, CUNA is asking the NCUA to grandfather credit unions currently utilizing the $3 million alternative cap.

CUNA does not believe replacing the current nonmember deposit limit with the limit for borrowings would pose any increased risk to the NCUSIF. Proposed changes would increase the ability of credit unions to accept nonmember deposits, which will enhance growth opportunities for credit unions.

Public unit and nonmember deposits are equal to only 1.1% of system assets.