NCUA Chairman Todd M. Harper during a meeting of the NCUA Board.
As Prepared for Delivery on November 21, 2024
Thank you, Anthony and Tim, for your presentation and the work of your team in bringing this funding request for the Central Liquidity Facility in 2025 to 2026 before the Board.
Authorized by Congress, the CLF was created by credit unions for credit unions, but it’s operated and overseen by the NCUA. The NCUA Board, in its statutory capacity as the CLF’s executive body, must approve the CLF’s budget. Last year was the first year the CLF’s budget was presented separately from the NCUA’s operating budget. This year, the Board is considering funding requests for the CLF on a two-year cycle, which aligns with the NCUA’s longstanding two-year budget process.
As noted earlier, the proposed CLF budget amounts to just over $2.3 million for 2025 and $2.4 million for 2026. The modest increase in the facility’s budget results from changes in personnel costs compared to the prior year. Although the proposal includes one new full-time equivalent employee being added to the CLF’s staff, the costs associated with this new employee are offset by reductions in CLF contracts.
This new employee will better distribute the workload across the team, facilitate succession planning, and allow the CLF’s president, in particular, more time to engage with the industry on the benefits of the CLF and how the facility can serve as an essential part of a comprehensive liquidity management program.
This proposed budget is reasonable and prudent to the long-term needs of the CLF. As such, I will support this request.
There’s an age-old maxim: “There’s strength in numbers.” That’s especially true here because the more members the CLF has, the more effective it becomes as a liquidity facility for the industry. The CLF currently has 431 regular members and 11 corporate credit union correspondents. The CLF’s capacity, moreover, currently stands at $21.7 billion compared to $20.1 billion approximately one year ago. That’s steady improvement and welcome news.
Anthony, would you talk about the growth trends in CLF membership during the last year? Also, what are the general characteristics of the CLF’s new members?
[PAUSE FOR RESPONSE]
Thank you for that information. Your response illustrates how the CLF can support all credit unions and not just the larger ones with more than $250 million in assets. My next question is why should smaller credit unions below that regulatory threshold join the CLF?
[PAUSE FOR RESPONSE]
Thank you. Although it’s not required by our rules, having small and mid-sized credit unions with less than $250 million in assets join the CLF provides them access to this vital federal liquidity backstop during times of stress. Once markets freeze up, it’s difficult for institutions to quickly access emergency liquidity from market sources. Joining the CLF in advance of a liquidity event can better assist credit unions of all sizes to navigate unanticipated market situations.
While the CLF is growing in capacity, the congressional restoration of the expired CLF statutory enhancements — like the agent-membership provisions for corporate credit unions to serve a subset of their members — would serve the whole system well. That’s why the NCUA Board continues to call upon Congress to reinstate these provisions. In fact, we’re unanimous in our views here.
Anthony, would you explain why this legislation is essential to a strong and responsive CLF?
[PAUSE FOR RESPONSE]
Thank you for clarifying that important point, Anthony. This legislation would better enable the CLF to serve as a shock absorber for future liquidity events within the credit union system. In my written testimony before the House Financial Services Committee yesterday, I urged Congress to reinstate these provisions. And, I do that again today.
President John F. Kennedy famously said, “The time to repair the roof is when the sun is shining.” Indeed, should the economic environment or market conditions rapidly change as they did in March of 2023, the industry must be prepared. Joining the CLF now is an effective and prudent way for credit unions of all sizes to be prepared should liquidity storm clouds suddenly appear on the horizon.
In sum, the CLF is a beneficial tool, and it should be part of any credit union’s liquidity risk management plans for a variety of contingencies, not merely during times of crises.
Again, I will vote in favor of this budget. That concludes my remarks. I now recognize Vice Chairman Hauptman.