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NCUA Proposes Rule to Simplify Share Insurance

The National Credit Union Administration (NCUA) has proposed amendments to its regulations governing share insurance coverage for accounts at federally insured credit unions (FICUs). The main proposed changes are:

  • Simplifying the rules for insurance coverage of trust accounts by establishing a new "trust accounts" category that covers both revocable and irrevocable trusts. A simpler formula would be used to calculate coverage based on the number of beneficiaries up to a maximum of 5, rather than looking at interests and contingencies.

  • Providing consistent insurance treatment for all mortgage servicing account balances held to make principal and interest payments to lenders, whether the funds come directly from the borrower or are advances from the servicer.

  • Explicitly allowing the NCUA flexibility to look at records maintained by third parties on behalf of FICU members when determining insurance coverage details.

  • Removing examples from the regulations and instead providing them through the NCUA's Your Insured Funds brochure and website.

The proposed changes aim to simplify the rules, align with recent FDIC changes, facilitate prompt insurance payments when credit unions fail, and reduce burdens. Comments are invited on all aspects of the proposal.

The NCUA issued this statement after the unanimous vote:

Proposed Rule on Simplification of Share Insurance Provides Parity With FDIC

A proposed rule that would simplify the NCUA’s share insurance regulations by establishing a “trust accounts” category was unanimously approved by the NCUA Board. The trust accounts category would provide Share Insurance Fund coverage of funds in both revocable and irrevocable trusts deposited at federally insured credit unions in the accounts of members or those otherwise eligible to maintain insured accounts.

Said Chairman Harper, “Deposit insurance at federally insured credit unions and banks is the cornerstone that secures the foundation of our nation’s vibrant credit union and banking systems. The confidence created by knowing savings are protected by the full faith and credit of the United States allows consumers to rest easy, knowing their hard-earned nest eggs up to the current limit of $250,000 will be safe even during periods of financial and economic stress.”

Additionally, the proposed rule would provide:

  • Consistent share insurance treatment for all mortgage servicing account balances held to satisfy principal and interest obligations to a lender.

  • More flexible recordkeeping requirements to explicitly allow the NCUA to look to records held in the normal course of business that are maintained by parties other than federally insured credit unions and their members.

The proposed changes to the trust account and mortgage servicing account provisions in the NCUA’s Share Insurance Fund regulations would align with changes the FDIC previously adopted that take effect on April 1, 2024.

Comments on the proposed rule must be received no later than 60 days following publication in the Federal Register.

A PDF of the rule is attached.

Download PDF • 552KB

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