National Credit Union Share Insurance Fund
Encyclopedia
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.
In 1970 Congress approved and President Richard M. Nixon signed Public Law 91-206 (see ), 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.
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 of 2010.
NCUA insurance covers "member share accounts and deposits":
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
The National Credit Union Administration is the United States independent federal agency that supervises and charters federal credit unions...
(NCUA) for the purpose of providing deposit insurance
Deposit insurance
Explicit deposit insurance is a measure implemented in many countries to protect bank depositors, in full or in part, from losses caused by a bank's inability to pay its debts when due...
to protect deposits of credit union
Credit union
A credit union is a cooperative financial institution that is owned and controlled by its members and operated for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to its members...
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
Full Faith and Credit Clause
The Full Faith and Credit Clause is the familiar name used to refer to Article IV, Section 1 of the United States Constitution, which addresses the duties that states within the United States have to respect the "public acts, records, and judicial proceedings of every other state." According to...
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
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
Treasury security
A United States Treasury security is government debt issued by the United States Department of the Treasury through the Bureau of the Public Debt. Treasury securities are the debt financing instruments of the United States federal government, and they are often referred to simply as Treasuries...
, 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 2005Federal Deposit Insurance Reform Act
The Federal Deposit Insurance Reform Act of 2005 , is an act of the United States Congress that regulates banks...
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
Emergency Economic Stabilization Act of 2008
The Emergency Economic Stabilization Act of 2008 The Emergency Economic Stabilization Act of 2008 The Emergency Economic Stabilization Act of 2008 (Division A of , commonly referred to as a bailout of the U.S. financial system, is a law enacted in response to the subprime mortgage crisis...
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 of 2010.
NCUA insurance covers "member share accounts and deposits":
- Share draft accounts (aka "checking accounts").
- Share savingSavings accountSavings accounts are accounts maintained by retail financial institutions that pay interest but cannot be used directly as money . These accounts let customers set aside a portion of their liquid assets while earning a monetary return...
s 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 certificatesCertificate of depositA certificate of Deposit is a time deposit, a financial product commonly offered to consumers in the United States by banks, thrift institutions, and credit unions....
(CDs), which generally require funds be kept in the account for a set period. - Outstanding Cashier's Checks, Interest Checks, and other negotiable instrumentNegotiable instrumentA negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time. According to the Section 13 of the Negotiable Instruments Act, 1881 in India, a negotiable instrument means a promissory note, bill of exchange or cheque payable either...
s 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.