NCUA Vice Chairman Kyle S. Hauptman Statement on the Federal Credit Union Interest Rate Ceiling

As Prepared for Delivery on April 20, 2023

Thank you, Amanda, Frank, and Naghi, for your presentation.

At the January 2023 Board Meeting, the NCUA Board voted to keep the interest rate ceiling at 18 percent. Congress was clear that the Board has the authority to raise the ceiling above the statutory limit of 15 percent if the safety and soundness of individual credit unions are impacted. We saw data in January and again today, that lowering the rate to 15 percent would impact the safety and soundness of several individual credit unions.

Although there were more than a few stakeholders asking the Board to raise the ceiling above 18 percent, we did not have the evidence in January that met the criteria set by Congress. And after further analysis by staff, we still do not have the data to support raising the ceiling above 18 percent. Thank you, Mr. Chairman, and staff, for agreeing to my request for a reevaluation of the interest rate ceiling for today’s Board Meeting.

I’d also like to thank you, Mr. Chairman, and the Office of the General Counsel for the analysis on the legality of using a floating interest rate for the interest rate ceiling. The concept of a floating interest rate ceiling makes economic sense to me, and the analysis was worth the effort. At this time, I do not believe there is a way we can do a floating rate ceiling that would satisfy stakeholders. It’s one of those situations where a majority of people would agree that another method might be superior, but that same majority will not be able to agree on exactly what that method is. I know this from my conversations in the last few months. Credit union members need to benefit when rates drop, such as in 2020 when the overnight Federal Funds Rate was 0 percent, the 10-year Treasury bond yielded was 0.1 percent, and 30-year mortgages could be had for under 2.50 percent. If that scenario persisted for years, as it has in Japan, any floating rate used by NCUA would have to, logically, yield a maximum interest rate at or below the 15-percent level decided on by Congress. And I know that is not what is expected by everyone who was asking me to find a way to raise our interest rate ceiling.

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