As prepared for Delivery at National Credit Union Administration February 18, 2021 Board Meeting:
Board Member Hood: Thank you for today’s presentation. Quarterly updates on the share insurance fund continue to be an important source of information for the Board, along with our public stakeholders, as we anticipate the potential impacts that COVID-19 has on the economy and on the credit union system. These presentations provide transparency into the condition of the fund and provide insight into the overall health of the credit union industry.
Nearly a year into the pandemic, and we have only seen one credit union failure. When you look at the CAMEL data on slide 12, it is positive. At present, this does not appear to be a repeat of the 2008 financial crisis, when I was last on this Board.
It seems clear to me that the equity ratio of 1.26 is driven by a flight to safety combined with an inflow of deposits from programs, including the payroll protection program and other federal government stimulus programs.
When I look back at 2020, I think there is a lot the credit union community can be proud of. In fact, even in the face of the global pandemic, credit unions had an outstanding year. Credit unions were able to change course in the middle of a global pandemic and found ways to serve their members. In 2020, credit unions helped members improve their cash flows with refinancings and lower rates and fees. Credit unions should not feel that the answer to solving the problem with the equity ratio is to stop taking deposits.
At present, the industry is sitting on record levels of liquidity. So while we can be concerned about capital and liquidity, there are records amounts of both in the system.
Why we do not know what the future holds, I believe the fund is well positioned to handle whatever may come our way as we plan for the worse and hope for the best.
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If a premium must be assessed on credit unions, which I am not confident is needed at present, it should be a last resort and should be used to cover credit union losses when possible under the law — not used to create incentives to spend more on agency operations through a growing share insurance fund budget.
