NCUA Board to Congress: Extend CLF Changes
All three NCUA board members pushed for extending updates to the Central Liquidity Facility at the agency's monthly meeting. Learn why.
All three agency board members push for extending updates to Central Liquidity Facility at monthly meeting.
The three members of the NCUA board on Thursday again called on Congress to extend pandemic-related changes to the agency’s Central Liquidity Facility.
Those changes expire at the end of the year.
“As I have said before, we should prepare for the worst and hope [for] the best,” board member Rodney Hood said during the board’s October meeting. “One of the best ways for the NCUA to prepare for the worst and hope for the best is to have a robust Central Liquidity Facility.”
What Are the Changes the NCUA Wants to Keep?
As part of pandemic-related legislation, Congress allowed corporate credit unions to become agent-members for groups of credit unions.
Without that agent membership, credit unions with less than $250 million in assets will be much less likely to have access to a federal liquidity backstop when they need it, board Chairman Todd Harper said.
“We already know of several credit unions experiencing liquidity issues in recent months, including some with more than $1 billion in assets,” Harper stated. “And, with ongoing inflationary pressures and likely continued interest rate increases, there is the potential for strong headwinds slowing the economy and increasing stress on households and financial institutions.”
Further, without legislation to extend the temporary CLF enhancement provisions, there will be a $9.7 billion reduction in reserve liquidity for the credit union system at the end of 2022, board members warned.
They noted specifically that the 3,648 credit unions with less than $250 million in assets with current access to the CLF through their corporate credit unions will lose a liquidity lifeline.
“The current interest rate risk environment makes a liquidity event a real possibility,” board member Kyle Hauptman said. “Without agent sponsorship, my fellow board members and I are deeply concerned about the consequences for the credit union movement.”
Where Do Credit Union Groups Stand?
Credit union trade groups also support extension of the CLF changes and have called on Congress to include it in unrelated, must-pass legislation.