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Determining the Normal Operating Level

In December 2021, the NCUA Board approved a policy for setting the normal operating level, including the methodology used to determine the normal operating level. The changes were based on comments received on the request for comment on the Policy for Setting the Normal Operating Level posted in the Federal Register on May 25, 2021.1 The Board’s response to the comments, revised policy, and changes to the methodology were posted to the Federal Register on December 21, 2021.2

The Board retained its main objectives in setting the normal operating level as follows:

  • Retain public confidence in federal share insurance;
  • Prevent impairment of the one percent contributed capital deposit; and
  • Ensure the Share Insurance Fund can withstand a moderate recession without the equity ratio declining below 1.20 percent over a five-year period.

The Board made the following changes to the methodology used to determine the normal operating level.

  • Eliminated the potential decline in value of the Share Insurance Fund’s claims on the Corporate Asset Management Estates component.
  • Eliminated the decline in the equity ratio through the end of the following year without an economic downturn component.

Based on the revised policy and methodology, and as shown in the table below, the Board has set the normal operating level at 1.33 percent to account for:

  • A 13-basis-point decline in the equity ratio due to the impact of the three primary drivers of the Share Insurance Fund’s performance in a five-year moderate recession.

Setting the Normal Operating Level

Component 2022
Statutory Minimum 1.20%
Plus: Potential Decline in Insurance Fund Performance3 0.13%
Equals: Normal Operating Level 1.33%
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