As Prepared for Delivery on February 16, 2023
Thank you, Eugene, and staff.
The credit union movement and the Share Insurance Fund continued showing positive results last quarter despite persistent economic uncertainty this past year.
Credit unions obviously have a vested interest in the maintenance of the Share Insurance Fund; the Fund’s money belongs to credit unions and their member-owners. Although the Share Insurance Fund is managed by the NCUA, it is cooperative in nature — much like the credit union movement itself.
Improved investment income, no significant credit union failures, and a decline in insured shares are factors that caused the equity ratio of the Share Insurance Fund as of December 31, 2022, to reach 1.30 percent, the highest it’s been since before the pandemic, however, this is still below the approved normal operating level of 1.33 percent.
I appreciate the work that my fellow Board Members and the OCFO staff did after the 2022 Q2 report to review and update the Share Insurance Fund’s investment portfolio, which meant subsequently increasing the percentage of investment in overnight funds. Just like a credit union board, the NCUA Board has the responsibility to regularly review its investment strategy, and I’m glad the money parked in overnight funds means we’re less likely to sell other investments at a loss.
But regardless of the Fund’s performance or what happens with interest rates, it is interesting to note that last year, of the six times a credit union failed and incurred a loss, five of those involved fraud. Thus, protecting the Share Insurance Fund also means watching for fraud.
One other item in today’s update is continued distributions from the corporate credit crisis that occurred a few years ago. Next month will be a distribution to various credit unions totaling around $218 million. That’s good news. But from a communication perspective, we are now informing these credit unions about their distributions beforehand. I made a priority of this two years ago – that we help credit unions plan by giving a heads up about these distributions. On Monday, credit unions receiving funds got an email stating the approximate amount and date of the distribution. I’m proud to take credit for small operational improvements that can make a big difference to credit unions.
In conclusion — despite persistent economic uncertainties, inflationary pressures, and rising interest rates — it is the NCUA’s job to ensure the Share Insurance Fund remains well-capitalized, with enough liquidity to address issues as they arise. Credit union member-owners should have 100 percent faith in NCUA’s insurance, regardless of extenuating circumstances. The whole point of insurance is the unexpected, the unforeseen troubles.
That concludes my remarks. I do have a few questions for you.
What portion of the funds are currently invested in overnights? When do you believe we will hit our overnight liquidity target of $4 billion?
Last year, five out of six credit union failures incurring a loss had fraud as a contributing factor. How does this compare to 2021?
When did we start emailing credit unions with information about the distributions they have coming their way due to winding down the corporates’ estates?
Thank you, Eugene. Mr. Chairman, this concludes my remarks.