NCUA Board Proposes Expansion in Nonmember Deposit Cap

The National Credit Union Administration (NCUA) Board on May 23 proposed a rule that would significantly expand the ability of a federal credit union (FCU) to use public unit and nonmember deposits to fund its operation.

The proposed rule increases the current nonmember deposit limit from 20 percent of total shares to 50 percent of paid-in capital and unimpaired capital and surplus less any public unit and nonmember shares.

Public units include the federal government, states and territories, counties and municipalities and tribal entities.

NCUA acknowledged in its proposal that the 20 percent cap dates to the late 1980s and was imposed “because of the asset/liability management problems related to public unit and nonmember shares that arose at certain FCUs, which resulted in material losses for the National Credit Union Share Insurance Fund.”

Under the proposal, designated low-income FCUs, which account for 57 percent of all FCUs, would be able to accept deposits from any nonmember up to the 50 percent level.

The proposal would require a federal credit union to develop a specific use plan if its nonmember shares, combined with its borrowings, exceeds 70 percent of paid-in and unimpaired capital and surplus.

Comments on the proposal are due 60 days after publication in the Federal Register.

Read the proposed rule.