National Credit Union Share Insurance Fund
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The National Credit Union Share Insurance Fund (NCUSIF) is administered by the National Credit Union Administration (NCUA) for the purpose of providing deposit insurance to protect deposits of credit union members at insured institutions in the United States. It was created in 1970 shortly after the creation of the NCUA as an independent regulator of credit unions. The NCUSIF is funded completely by participating credit unions, and no taxpayer dollars have ever been used to bail out a credit union. The NCUSIF is backed by the full faith and credit of the United States government.
As of 31 December 2007 the fund had a balance of $7.3 billion and insured nearly 87 million accounts at 5,036 federal credit unions and 3,065 state-chartered credit unions.
Funding, premiums and dividends
In 1970 Congress approved and President Richard M. Nixon signed Public Law 91-206 (see 12 U.S.C. §§ 1781–1790(c)), creating the National Credit Union Administration as an independent agency. Soon after, Congress established the National Credit Union Share Insurance Fund and made the NCUA responsible for its administration.
The NCUSIF is funded entirely by deposits from insured credit unions. All Federal credit unions, as well as any state chartered credit union insured by the fund, are required to maintain a balance equalling 1% of all covered deposits in the fund. The NCUA is required to set a target equity balance of at least 1.2% and no more than 1.5% of the total of insured deposits.
The majority of the fund is invested in United States treasury securities, and a significant portion of the earnings are used to fund the operations of the NCUA. Proceeds from the fund provided 53.3% of the NCUA operating budget in FY 2007 with the remainder coming from operating fees charged to regulated credit unions.
In the event that the equity ratio of the fund falls below 1.2%, the NCUA will charge a premium to insured credit unions to maintain the required minimum. In years when the fund achieves a ratio above 1.3%, it will pay out excess funds to insured credit unions in the form of a dividend. Since the fund was recapitalized by credit unions in 1985, the fund has charged one premium in 1992. The fund has issued several dividends to member credit unions, the most recent in 2007.
NCUSIF insured accounts
Since the passage of the Federal Deposit Insurance Reform Act of 2005 deposits were insured for up to $100,000 per insured account, or $250,000 for certain retirement accounts. The passage of the Emergency Economic Stabilization Act of 2008 increased the amount of covered shares to $250,000 until the end of 2013. This increase was made permanent by the Dodd–Frank Wall Street Reform and Consumer Protection Act in July 2010.
NCUA insurance covers "member share accounts and deposits":
- Share draft accounts (aka "checking accounts").
- Share savings that can be added to or withdrawn from at any time.
- "Money market share" accounts, essentially high-interest share savings accounts (the name is similar to "money market funds" which are not insured).
- Share certificates (CDs), which generally require funds be kept in the account for a set period.
- Outstanding Cashier's Checks, Interest Checks, and other negotiable instruments drawn on the accounts of the credit union.
Accounts at different credit unions are insured separately. All branches of a credit union are considered to comprise a single credit union. NCUA publishes a guide entitled Your Insured Funds setting forth the general contours of NCUSIF insurance, and addressing common questions asked by credit union members regarding insurance.
- "National Credit Union Administration Annual Report 2007" (PDF). Alexandria, VA: National Credit Union Administration. Retrieved 2009-08-08.
- Cole, Robert J. (1970-11-15). "Insurance for Credit Unions". The New York Times. pp. F13.
- Cooke, Sarah (2007-03-21). "NCUA Board to Reopen FOM Manual, NCUSIF Declares $52 Million Dividend". The Credit Union Times. Highline Media. Retrieved 2008-06-06.
- Hampel, Bill (October 2002). "What Happened to NCUSIF Dividends?". Credit Union Magazine.
- "Credit Union Premium Set". The New York Times. 1991-09-16. Retrieved 2008-07-12.
- "NCUA Increases Retirement Insurance Coverage" (PDF). National Credit Union Administration. May 2006. Archived from the original (PDF) on 2008-03-07. Retrieved 2008-07-12.
- "$250,000 Share Insurance Protection Extended to 2013". May 26, 2009. Retrieved September 21, 2009.
- H.R. 4173, § 335(b)
- "Credit Union Failures and Insurance Fund Losses: 1971-2004". Federal Reserve Bank of San Francisco. 2005-08-19.