NCUA Vice Chairman Kyle S. Hauptman Statement on Asset Thresholds Pertaining to Large Credit Unions

As Prepared for Delivery on March 18, 2021

I’d like to express my gratitude to the staff for the work done on this interim rule change. I’d also like to thank Chairman Harper and Board Member Hood for their support to place this on the agenda. I am supportive of the interim rule as it provides relief consistent with measures offered to similar sized banks.

More importantly, I support the change as it will allow those credit unions nearing the $10 billion threshold to thoughtfully and deliberately make the operational changes needed to comply with significantly heightened reporting requirements.

Normally, crossing the $10 billion threshold should be something one plans for carefully, given the substantial regulatory burden that comes with being over $10 billion — hence there’s not much reason to be sitting on, say, $10.1 billion in assets. Larger institutions do obviously place a larger risk on the Share Insurance Fund —no one is forgetting that — but today’s action is in line with NCUA’s efforts to provide temporary pandemic relief.

The funds from the $1.9 trillion American Rescue Plan Act started arriving this week. Previous stimulus programs have spurred more consumers than ever before to turn to credit unions for financial services. In the fourth quarter of 2020, credit union membership grew to 124.3 million with over 60 percent of members holding a credit union checking account, an indicator that credit unions are increasingly their primary financial institution. In 2020 assets grew to $1.85 trillion. Total share balances increased a record $273 billion, representing a year-over-year growth of over 20 percent.

In 2020, Americans slowed spending, increased deposits, and paid down or refinanced loans. The Commerce Department reported that household savings totaled $3.9 trillion last month, up from $1.4 trillion a year earlier. That’s a remarkable increase, but these changes in behavior are the result of the current environment and do not represent a threat to safety and soundness. We can also expect members to soon ramp up spending, as the American economy is the undisputed world champion at finding ways for consumers to spend money.

By taking this step, the NCUA is acknowledging the uniqueness of the situation and not making it harder on credit unions already stretched thin by the circumstances. This interim final rule will help credit unions nearing $10 billion to continue to assist members while thoughtfully planning for the future.

And, last thing: while we’re talking about thresholds, we may want to continue our conversations around aligning incentives so the NCUA can do what credit unions do, which is put resources where they’re most effective. What I mean is that perhaps well-managed credit unions can earn a longer exam cycle. If we can offer more credit unions the carrot of getting an 18-month exam cycle only if they get high CAMEL ratings, then NCUA can focus on the more problematic institutions. Plus those that earned the 18-month cycle would really want to excel on their future exams so they can keep the 18-month cycle, and those who didn’t earn it would have an incentive to do better so that they, too, can move to 18-months. 

We get what we incentivize, so I’d like to see us continue to exam what we are incentivizing.

This concludes my remarks. Thank you, Mr. Chairman.