What Is The NCUA?

Most Americans are familiar with the Federal Deposit Insurance Corporation [FDIC] and the protection this agency provides. However, there is another, less well-known federal agency that provides insurance for deposits at member credit unions – the National Credit Union Administration [NCUA].

Like the FDIC, the NCUA plays a vital role in promoting confidence in the American financial system and ensuring that deposits are safe from financial institution failure. Cash managers who understand this role are better equipped to ensure the security of company cash.

Mission and Purpose Of the NCUA

The NCUA is a governing body for all federal and most state credit unions. It’s mission is to protect the credit union system and members through “effective chartering, supervisions, regulation, and insurance.”

While all aspects of the NCUA’s mission are important, insurance is particularly significant to businesses. The NCUA provides protection by administering the National Credit Union Share Insurance Fund which is similar to the FDIC’s Deposit Insurance Fund. It allows the NCUA to offer insurance for up to $250,000 per account ownership category at each insured credit union.

The NCUA insurance limit includes both principal and accrued interest invested in a covered account type such as share draft accounts, share savings accounts, and time deposits. It does not apply to investments including stocks, bonds, mutual funds, life insurance policies, and municipal securities.

Scope and Structure Of the NCUA

Like the FDIC, the NCUA is an independent federal agency. As such, it is backed by the full faith and credit of the United States government.

As previously mentioned, the agency covers all federally chartered credit unions and the majority of state-chartered credit unions. This gives them authority over financial institutions with 142 million member-owners and approximately $2.31 trillion in total assets according to their website.

The NCUA is overseen by a three-member board of directors. Board members are appointed by the president and confirmed by the Senate. These individuals serve staggered six-year terms where they are responsible for setting policy, approving budgets, and adopting rules.

A Brief History of Credit Union Supervision

While banks have existed for many centuries, credit unions are a relatively new type of financial institution. They came to the United States in the early 20^th century and required legislation to be adapted to their unique member-owner structure.

The Early Years of U.S. Credit Union Legislation

The first credit union opened in 1909 in New Hampshire. This prompted the creation of the Massachusetts Credit Union Act – the first law to regulate the establishment of credit unions in the United States.

The Credit Union National Extension Bureau was then created in 1921 to promote the philosophy of credit unions and the establishment of new credit unions. The association’s efforts were successful and 38 states and the District of Columbia enacted credit union laws by 1935.

The Great Depression Spurred Federal Oversight

In the wake of the Great Depression, financial institution failures were rampant, and Americans had lost trust in the financial system. President Roosevelt created the Federal Credit Union Division and placed it under the Farm Credit Administration in response. However, the federal government did not establish a method for insuring credit union deposits at that time.

In 1942, federal supervision of credit unions was transferred to the FDIC. Just six years later, the agency responsible for credit union supervision was renamed the Bureau of Federal Credit Unions and was moved under the Federal Security Agency. Still, there was no insurance fund to guarantee deposits at federal credit unions.

Credit unions expanded rapidly in the early 1950s, and the Bureau of Federal Credit Unions was moved under the Department of Health, Education, and Welfare. During this time, the Bureau was financed by fees on federal credit unions, similar to the structure of the FDIC but without deposit protection.

The Modern NCUA Was Formed

Finally, in 1970, Congress created the National Credit Union Administration as an independent federal agency. The current three-board structure of the NCUA was established in 1979. Also in that year, Congress created the Central Liquidity Facility – a lender of last resort for the credit union system, similar to the Federal Reserve’s Discount Window.

In 1982, legislation granted the NCUA the authority to oversee emergency mergers and to temporarily act as a conservator for struggling credit unions. Then in 1987, the NCUA adopted the CAMEL Rating System for credit unions. These steps made the NCUA even more similar to the FDIC.

The federal government spent many years finalizing the role and authority of the NCUA. That effort resulted in a robust agency that has the ability to insure deposits, oversee member financial institutions, and protect the soundness of the credit union system.

NCUA Insurance Limits Over Time

The National Credit Union Share Insurance Fund was created in 1970 and initially insured deposits up to $20,000. This limit was raised several times over the following decades.

In the midst of the Great Recession, President Bush temporarily raised the NCUA and FDIC insurance limits to $250,000. President Obama made this limit permanent two years later and it still holds today.

Which Is Better for Business Cash: NCUA or FDIC Insurance?

The FDIC has been established for a longer period of time, but functions similarly to the NCUA. In fact, the protection that these agencies provide today is functionally equivalent.

When a business needs to protect its cash, both NCUA and FDIC insurance are excellent choices. However, both agencies limit their coverage to $250,000 per ownership category at each insured financial institution. This limit leaves some deposits unprotected for companies with significant cash reserves.

Businesses can access extended deposit protection by splitting cash between multiple banks or credit unions, but this process is labor intensive. Fortunately, modern cash solutions provide businesses with simple access to extended protection.

With ADM, Businesses Have Simple Access to Extended Government Protection

At American Deposit Management, we provide access to extended protection from the NCUA or FDIC through our nationwide network of financial institutions. Our financial technology spreads deposits across our network so that every penny of a company’s cash can be covered by government insurance.

Our modern cash solutions also provide access to nationally competitive returns for deposit accounts and Certificates of Deposit. Businesses get all of this with one account and one consolidated monthly statement.

To learn more about our deposit management services and get started today, contact us.

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