NCUA Board Member Tanya F. Otsuka Statement on the Central Liquidity Facility’s Budget for 2025 to 2026

As Prepared for Delivery on November 21, 2024

Thank you, Anthony and Tim, for your presentation, preparing the Central Liquidity Fund's budget, and the day-to-day work your team does to manage the CLF.

The proposed CLF budget for 2025 is $2.3 million. This represents an increase of 4.9% from 2024's approved budget.

When accounting for mandatory and appropriate staff salary increases, this increase is reasonable in my view. Furthermore, I support the CLF's plan to fill the full-time assistant vice president for credit position. This person would be responsible for loan applications, credit worthiness assessments, and function as the vice president in the case of the CLF Vice President's absence.

"The CLF is only as strong as the members that join. I appreciate the work your team has done to increase the CLF membership and support a budget that invests in activities that will grow the CLF."

Making this a full-time role rather than outsourcing these services to third-party providers allows for more consistent loan practices and safeguards business continuity in the event of leadership change. We see this is accounted for in the budget by the accompanying decrease in the Contracted Services and Travel budgets for 2025. You all are requesting a 75 percent decrease from what was approved for 2024.

As we continue to see rising delinquency rates and decreased loan performance across credit unions, it is even more important to have a strong liquidity backstop for credit unions.

And the CLF is only as strong as the members that join. I appreciate the work your team has done to increase the CLF membership and support a budget that invests in activities that will grow the CLF.

"The CLF should be seen as an important tool in a credit union's liquidity management strategy. This budget proposal allows for a more efficient facility, increased member outreach, and better staffing to allow for more resilient continuity plans. I support the staff budget recommendation."

From September 2023 to September 2024, we have seen the CLF grow by 31 members. During the same period, assets have grown by about $91 million, and retained earnings increased by $3.4 million. This is something we should be proud of, and it is good to see the facility working as intended. However, we should continue to focus on member outreach and ensuring credit unions see the value in joining.

It's important to make sure that smaller credit unions have access to cost-effective liquidity options. There have been bipartisan congressional efforts to extend agent membership in the CLF, which would help smaller credit unions, in particular.

The CLF should be seen as an important tool in a credit union's liquidity management strategy. This budget proposal allows for a more efficient facility, increased member outreach, and better staffing to allow for more resilient continuity plans. I support the staff budget recommendation.