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League Comments on NCUA's Move to Simplify Share Insurance Rules; Opposes Agency's Interest in New Recordkeeping Requirement


Your League this week submitted comments on NCUA's proposed amendments for regulations governing share insurance coverage.

In our letter, we expressed our support for the agency's efforts to simplify the share insurance rules on trust accounts. The proposed changes create parity with banks and are designed to make share insurance coverage easier to understand with regard to trust accounts.

"Trust accounts are already more complex in structure than individual share accounts – adding additional complexity by having different rules and calculation methods due to the type of trust, number of beneficiaries, or other factors increases the likelihood of a misunderstanding of actual coverage levels. The simplification of rules benefits not only credit unions and credit union members but also the NCUA," notes the letter.

The proposal would also make amendments to the share insurance coverage rules on accounts maintained at credit unions by mortgage servicers, with our letter noting our support for the measure, which would again offer parity with bank regulations and enable credit unions to manage MSAs more efficiently.

Finally, the proposal looks at various recordkeeping requirements, with the League supporting improvements in recordkeeping requirements, but opposing any bid by the NCUA to implement a new recordkeeping requirement on credit unions that currently applies to the nation's largest banks.

In the proposal, the NCUA notes that the current language of 12 CFR 745(c)(2) requires records to be considered in the determination of share insurance coverage to be maintained either by the credit union or the member. The proposal highlights that often, these records may be kept by an agent, fiduciary, or other third party, which represents something of a gray area within the regulation as currently written.

"The proposed rule would provide clarity that records in the custody of such third parties on behalf of the member would be considered as records of the member. We support this amendment, as many credit union members rely on trusted third parties for recordkeeping as part of their estate planning."

NCUA also asks about the benefit of an FDIC rule requiring banks with more than two million deposit accounts to configure their IT systems to be capable of calculating the insured and uninsured amount in each deposit account and to maintain complete and accurate information needed by the FDIC. In the proposal, the NCUA asks if it should consider adopting similar requirements for credit unions, and if so, what the threshold for the number of accounts should be.

"We do not support the implementation of this requirement for credit unions, as it is unnecessary and would place an additional regulatory burden on credit unions," notes our letter. We cite the associated costs and uncertainty surrounding the benefit of such a requirement as reasons for our opposition.

Read our letter

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