As Prepared for Delivery on October 19, 2023
Thank you, Ian, Frank, and team, and to you, Rachel, for filling in for Thomas Zells, the principal author of this proposed rule. Deposit insurance impacts every federally insured credit union member. As a cooperative fund, the National Credit Union Share Insurance Fund is chiefly made up of the one percent deposit by credit unions. Although deposit insurance was top of mind for consumers and financial institutions following the demise of Silicon Valley this year, this proposed rule is not a reaction to that event. However, the issues surrounding Silicon Valley Bank highlighted how important deposit insurance is to consumers.
Over the past four years, NCUA staff fielded roughly 7,000 questions on the topic. The sheer volume of questions suggests the rules need to be simplified. One of the only products we produce as an agency is regulations. I believe that clear regulation is better regulation. Language that is confusing or lacking in clarity is subject to misinterpretation by regulated entities and consumers. Trust is lost in the confusion, and ultimately the consumer may suffer.
Although the proposed rule is an effort to align NCUA regulations with those of the FDIC, a significant amount of work went into tailoring it to fit the credit union movement. I sincerely appreciate the effort to clarify for credit unions and members what they can expect from their Share Insurance Fund.
The proposed rule simplifies several complex issues. First, the proposed rule takes the rules for coverage for revocable and irrevocable trusts — which are different — and replaces them with one rule.
Second, the proposed rule clarifies coverage amounts. A member’s trust accounts will be insured for up to $250,000 per trust beneficiary – with up to five beneficiaries – regardless of whether the trust is revocable or irrevocable. And this is regardless of contingencies or the allocation of funds among beneficiaries.
This would provide for deposit insurance coverage of up to $1,250,000 per member per insured credit union for trust accounts. For credit unions contemplating estate planning as a service to improve members’ financial health and as a new revenue source, this simplification of the rules and coverage may be helpful.
Third, the proposed rule is intended to facilitate faster deposit insurance determinations and payouts. Under the current, complicated trust rules, the review of trust accounts is detailed and time-consuming. The proposed rule should help streamline this process and get folks their funds in a timely fashion.
I look forward to reading the comments from stakeholders.
Mr. Chairman, that concludes my comments. I have a couple of questions.