NCUA Chairman Todd M. Harper Statement on the NCUA’s Final Rule to Simplify Share Insurance Coverage Requirements

As Prepared For Delivery on September 19, 2024

Thank you, Tom and Paul, for your presentation on the final rule to simplify certain share insurance requirements related to trust accounts and mortgage servicing accounts, among other things. And, thank you to the many team members across the agency who worked collaboratively to bring this final rule before the NCUA Board today. It's a commonsense package of regulatory changes that I fully support.

By establishing a unified "trust accounts" category that treats coverage of funds in revocable trusts and irrevocable trusts deposited at federally insured credit unions in the same manner, this final rule simplifies the share insurance regulations and brings the National Credit Union Share Insurance Fund and the Federal Deposit Insurance Corporation's Deposit Insurance Fund into greater alignment. That's a positive change not only for credit union staff who will have streamlined procedures when working on such trust accounts, but it's also a benefit for credit union members who will better understand their coverage options.

And, it's a timesaver for the NCUA's share insurance specialists who during the last five years have fielded more than 17,000 calls about share insurance coverage for different types of trust accounts. This rule change will also lead to greater efficiency in the NCUA's Asset Management and Assistance Center when managing future liquidations.

Specifically, the final rule eliminates distinct and separate sets of rules and insurance coverage calculations for shares of revocable trusts and irrevocable trusts. Those rules led to public confusion about the share insurance coverage of trust accounts maintained at federally insured credit unions. This final rule aligns the coverage standards for both types of trust accounts and establishes a simplified formula for calculating coverage for funds deposited at federally insured credit unions.

"Such parity between the two federal deposit insurance programs promotes greater public confidence in the dual systems for protecting shares and deposits. And, as one commenter noted, such parity is crucial for maintaining consistency and fairness in the financial system. I couldn't agree more."

This final rule also allows for more timely share insurance determinations by the NCUA of trust accounts, which will facilitate faster payments to accountholders in the event of a credit union liquidation. In addition, the rule provides members at federally insured credit unions with the same protections as consumers who use trust accounts at federally insured banks and thrifts.

Such parity between the two federal deposit insurance programs promotes greater public confidence in the dual systems for protecting shares and deposits. And, as one commenter noted, such parity is crucial for maintaining consistency and fairness in the financial system. I couldn't agree more.

Public trust in our financial system must never be taken for granted. We saw firsthand the effects on consumers and turmoil in the markets caused by several large bank failures last year. Deposit insurance at federally insured credit unions and banks is vital as it stabilizes the financial system during periods of economic uncertainty and financial stress. More importantly, it gives consumers confidence to entrust their hard-earned savings and nest eggs to a federally insured financial institution.

Additionally, this final rule modifies the treatment of share insurance coverage for mortgage service accounts, also bringing the credit union system into greater alignment with the banking system when it comes to deposit insurance coverage. Credit unions have pronounced increased their mortgage lending and servicing in the 16 years since we last updated this portion of the share insurance coverage rule in 2008, so this change is an important one.

By giving credit union members and members of the public who use trust accounts and credit unions who service mortgage accounts the same level of protection - whether the accounts are maintained at federally insured credit unions or banks - we must ensure parity, to the extent possible, and maintain confidence in our nation's credit union and banking systems. I, therefore, support this rule.

"Public trust in our financial system must never be taken for granted. We saw firsthand the effects on consumers and turmoil in the markets caused by several large bank failures last year. Deposit insurance at federally insured credit unions and banks is vital as it stabilizes the financial system during periods of economic uncertainty and financial stress. More importantly, it gives consumers confidence to entrust their hard-earned savings and nest eggs to a federally insured financial institution."

That said, before closing I do have several questions for staff. First, will the merger of the revocable and irrevocable trust categories into one single group for share insurance affect the application or operation of state trust law?

Thank you. It's good to know that our regulatory change will not affect state law in any way. Second, many credit union staff and members rely on the NCUA's Your Insured Funds brochure as well as mycreditunion.gov to answer questions about share insurance coverage. Once we publish these regulatory changes in the Federal Register, how quickly do we anticipate having both resources updated?

Thank you. I know that I would like to have those updated resources in place as soon as possible and appreciate the hard work of the NCUA team that will go into completing those tasks. Finally, in the preamble to this final rule we note that the $1.25 million-per-grantor cap is unlikely to be too low. What evidence do we have for reaching that conclusion? What, for example, is the median size of a trust fund or the amount of the average inheritance?

Thank you for those answers. That concludes my remarks. I now recognize the Vice Chairman.

Public link

Please use the above public link if you want to share this noodl on another website.