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This podcast provides you the ability to listen to new regulatory guidance issued by the National Credit Union Administration, and occasionally the F D I C, the O C C, the F F I E C, or the C F P B. We will focus on new and material agency guidance, and historically important and still active guidance from past years that NCUA cites in examinations or conversations. This podcast is educational only and is not legal advice. We are sponsored by Credit Union Exam Solutions Incorporated. We also have another podcast called With Flying Colors where we provide tips for achieving success with the N C U A examination process and discuss hot topics that impact your credit union.
Samantha: Hello, this is Samantha Shares.
This episode covers N
C U A Chairman Kyle S.
Hauptman's Testimony Before the
House Financial Services Committee.
The following is an audio
version of that document.
This podcast is educational
and is not legal advice.
We are sponsored by Credit Union
Exam Solutions Incorporated, whose
team has over two hundred and
forty years of National Credit
Union Administration experience.
We assist our clients with N C
U A so they save time and money.
If you are worried about a recent,
upcoming, or in process N C U A
examination, reach out to learn how they
can assist at Mark Treichel dot com.
Also check out our other podcast called
With Flying Colors where we provide tips
on how to achieve success with N C U A.
And now the document.
Chairman Hill, Ranking Member Waters,
and members of the committee, thank you
for the opportunity to appear before
you today to discuss the National Credit
Union Administration, the N C U A.
As the current Chair, I remain dedicated
to serving in this role, and no other,
until my successor is confirmed.
President Trump has nominated Mr.
John Crews to the N C U A Board.
He is a seasoned and committed
leader with a track record of
balancing innovation and safety.
In other words, well-suited for the role.
I am confident that Mr.
Crews will further strengthen the agency,
and I wish him the best as he moves
through the Senate confirmation process.
Over the past year, N C U A has
experienced significant changes.
My primary goals as Chairman have been
to leave N C U A ready to embrace the
future, supporting a robust and innovative
credit union industry, and protecting the
National Credit Union Share Insurance Fund
through effective, appropriate supervision
that is focused on material risks.
I have pursued these goals by
championing regulatory improvements,
embracing innovations like stablecoins,
and improving customer service.
As digital currency and stablecoins
reshape the global financial system,
credit unions have an opportunity to
embrace this transformation from a solid
foundation of safety and soundness.
Stablecoins can make payments
faster, cheaper, and more inclusive.
On May fifteenth, twenty twenty six,
we announced a proposed rulemaking for
permitted payment stablecoin issuer
standards, our second rulemaking
required under the GENIUS Act.
This proposed rule puts credit
unions on equal footing with banks.
Credit unions are well poised to
benefit from this long-overdue update
to America's payment ecosystem.
As stablecoins are more widely adopted,
we Americans may no longer be made fun
of for speaking about how many business
days a payment will take to settle.
Every day is a business
day with stablecoins.
All three hundred sixty five days of the
year, and all twenty four hours of the day
are equal in terms of sending payments.
Tax refunds may eventually
arrive on Sundays or holidays.
And if we ever have a repeat of
the COVID outbreak in March twenty
twenty, Americans should be able
to receive emergency stimulus funds
in a more timely and secure manner.
Beyond the consumer benefits,
the big picture benefit of
stablecoins is maintaining the
U S dollar's global status.
The GENIUS Act should stimulate
demand for Treasuries, thereby
lowering borrowing costs for both
the U S government and consumers.
Even repo rates on Treasuries may fall,
all else being equal, given that the
GENIUS Act allows for investing in
Treasury reverse-repos, and Treasuries
are more attractive when they can
be used to obtain cheap financing.
And for all the debate about the effect
on deposits held at our domestic banks
and credit unions, a large portion of the
money expected to flow into stablecoins
is expected to come from abroad.
Over eighty percent of existing dollar
stablecoin usage is outside the U S.
When most Americans use the phrase dollar
stablecoins, we tend to focus on the
stablecoin part, because stablecoins
are a much better settlement token.
Transactions are easier but they only
work if they are indeed stable and
interchangeable with U S dollars.
But for those abroad, the dollar part of
dollar stablecoin is just as important.
We, as Americans, may have gotten so used
to the dollar's global dominance that we
don't notice what an advantage we have.
Just ask the British what it's like
to lose reserve currency status.
But the GENIUS Act and dollar-denominated
stablecoins are ways of striking back
against those in Beijing, Tehran, or
Moscow who continually push for the
U S dollar to become less important,
less ubiquitous, and less useful.
Thus, I'm pleased to be working with
my colleagues here at this table to
do our part in this important effort.
Turning to the financial literacy
efforts that are a big focus
of the Administration's two
hundred fiftieth anniversary.
Last month, I joined my colleagues
at this table for a Financial
Literacy event hosted by the O C C.
The event was a wonderful opportunity to
hear how banks and credit unions of all
sizes empower people and their communities
by educating people of all ages, from
the elderly to kids in kindergarten.
I spoke about how financial security
is essentially an amazing product,
and one that can be purchased on the
open market via saving and investing.
Today, approximately four thousand
three hundred credit unions serve
over one hundred forty five million
members and manage more than
two trillion dollars in assets.
The credit union industry continues
to balance innovation, access,
and safety and soundness for their
members, and the system is resilient.
As of December thirty first, twenty
twenty five, the aggregate net worth
ratio, which is how credit unions refer
to capital levels, was strong at eleven
point three percent, slightly higher
than the year prior, and asset growth
was a relatively solid five point
four percent in the fourth quarter
of twenty twenty five, up from two
point three percent a year earlier.
From a safety and soundness perspective,
the system is in a good place.
And finally, given that my successor
has been announced and this is
likely my last appearance before this
committee, I'd be remiss without making
one final point about the importance
of small banks and credit unions.
Regulation falls hardest on the smaller
institutions, yet we're a better,
more prosperous country because of
the unique American financial system
that still contains over eight
thousand banks and credit unions.
Many of them serve niche communities
and industries in a way that no one
else does, but laws and regulations
are often written as if all of them can
afford expensive compliance departments.
We, as government employees, may
not personally need these niche
services, but we don't want America
to look like Canada or other countries
dominated by four or five big banks.
If all we had in this country was the
four big mega-banks, it would probably
be just fine if you have steady
employment from a W two job, direct
deposit, a solid credit history and
nothing about your life creates extra
compliance work or reports to Fin C E N.
That type of person sounds a
lot like a federal employee.
And it's folks like us who write the
rules, sometimes oblivious to how they
land in various corners of this country.
From the first credit union, founded
in New Hampshire for millworkers from
Quebec who did business in French, to
the small banks today that serve the
soybean or potato industries, we're a
wealthier, more secure country because
Americans have so many banking choices.
Now obviously I, as a deposit insurer,
have a vested interest in a diversified
portfolio of insurance risks.
It doesn't help N C U A if credit
unions all look like each other.
But as an American, I felt the need to
make a broad point today about preserving
our unique, diversified banking system.
Thank you, Mr.
Chairman.
I look forward to the
Committee's questions.
Now, the state of the credit union system.
Overall, the credit union
system remains strong.
N C U A is closely monitoring some
indicators of potential stresses on
credit union performance, including an
increase in loan portfolio delinquencies.
On credit union system performance.
As of December thirty first, twenty twenty
five, the aggregate net worth ratio of
federally insured credit unions was strong
at eleven point two six percent, nineteen
basis points higher than a year earlier.
Year-over-year asset growth was a
relatively solid five point four
percent in the fourth quarter of
twenty twenty five, up from two
point three percent a year earlier.
The credit union system's total assets
were two point four trillion dollars
in the fourth quarter of twenty twenty
five, while total outstanding loans
were one point seven trillion dollars.
Year-over-year share growth strengthened
from four point two percent in the
fourth quarter of twenty twenty four
to five point five percent in the
fourth quarter of twenty twenty five.
The industry's return on average
assets improved compared with a
year earlier and remains sound
at zero point seven nine percent.
The net interest margin
increased year-over-year due
to an increase in loan yield.
Credit loss reserving expense was
unchanged from a year earlier at an
elevated level but remains manageable.
Credit union loan performance data
indicate some consumer financial stress.
The delinquency rate for total loans and
leases continued to rise on a four-quarter
basis, increasing five basis points to
one point zero three percent as of the
fourth quarter of twenty twenty five.
The rolling twelve-month net
charge-off rate was slightly lower
than its year-earlier level at
zero point seven eight percent.
However, it remained close to its
first-quarter peak of zero point eight
two percent, which was the highest reading
since late twenty eleven, when consumers
were recovering from the Great Recession.
The C A M E L S rating system is used by
financial regulators to guide allocation
of resources in the supervision of
federally insured credit unions based
on six measures: capital adequacy,
asset quality, management, earnings,
liquidity, and sensitivity to market risk.
The lower the C A M E L S rating,
the stronger the credit union.
As of the fourth quarter of twenty
twenty five, eighty two percent of
federally insured credit unions, that
is three thousand five hundred twenty
seven credit unions, have a composite
C A M E L S rating of one or two.
The credit union system remains
strong, and credit unions are able
to support their members' borrowing
needs, which is evidenced in data
on credit union mortgage lending.
Credit union mortgage lending strengthened
over the year ending in the fourth
quarter of twenty twenty five compared
with the same period a year earlier.
While recent growth in credit union
mortgage loan balances is still
somewhat below pre-pandemic rates of
increase, largely a reflection of weak
home sales, credit unions have been
successful in growing their mortgage
loan books relative to other lenders.
The commercial real estate
sector continues to show signs of
stress, due in part to interest
rates and occupancy levels.
While the credit union system's
exposure to commercial real estate
lending is low, N C U A continues
to monitor individual credit unions
with material exposure in this area.
On Share Insurance Fund performance.
Backed by the full faith and credit of
the United States, the Share Insurance
Fund provides insurance coverage
of up to two hundred fifty thousand
dollars for individual accounts at
federally insured credit unions.
As of December thirty first, twenty
twenty five, the Share Insurance Fund
insured one point eight six trillion
dollars in total share deposits, the
credit union version of bank deposits.
Notably, the Share Insurance Fund protects
about ninety percent of total share
deposits in the credit union system.
In comparison, uninsured shares equaled
nearly two hundred six billion dollars as
of December thirty first, twenty twenty
five, or ten percent of total shares.
As of December thirty first, twenty
twenty five, the Share Insurance Fund
reported a year-to-date net income
of three hundred seventy six million
dollars and a net position of twenty
three point nine billion dollars.
The equity ratio as of December
thirty first, twenty twenty five,
was sound at one point three percent,
slightly below the one point three
three percent normal operating level
target set by the N C U A Board.
As of December thirty first, twenty
twenty five, the Share Insurance
Fund's overnight investments balance
was four point five billion dollars.
The N C U A Board continues to
prioritize safety and liquidity
in the Share Insurance Fund.
On the state of the
Central Liquidity Facility.
N C U A's Central Liquidity Facility,
the C L F, supports a participating
credit union's ability to manage
liquidity risk in all economic
environments, especially during times of
systemic stress and reduced liquidity.
The C L F has four hundred forty
nine credit union members, providing
twenty three billion dollars in
lending capacity to its members,
which purchase stock in the C L F.
These credit unions range in asset
size from less than one million dollars
to more than twenty billion dollars.
The C L F helps protect nearly
four hundred twenty billion dollars
in credit union members' assets.
Under N C U A's regulations, credit
unions with assets of two hundred fifty
million dollars or more are required to
maintain access to a contingent federal
liquidity source, the C L F, the Federal
Reserve's Discount Window, or both, as
part of their contingency funding plan.
Credit unions with less than two hundred
fifty million dollars in assets are
not required to have membership with
a contingent federal liquidity source.
However, they must identify external
sources of liquidity as part of their
policies or contingency funding plan.
Agent members of the C L F are corporate
credit unions that act as intermediaries
for the C L F, providing access to the
C L F's liquidity for natural person
credit unions within their networks.
These corporate credit unions manage
the capital stock subscriptions and
liquidity needs on behalf of their
member credit unions, which are
not direct members of the C L F.
This arrangement allows the C L
F to extend loans to more credit
unions, bolstering the stability
of the broader credit union system,
especially for smaller credit unions.
On the state of N C U A.
N C U A continues to advance
its organizational and workforce
transformation in full compliance
with Executive Orders, and
O P M guidance, and statute.
Last year, the agency implemented
a voluntary separation program that
resulted in a twenty three percent
reduction in workforce, positioning N C
U A for a leaner and more agile future.
The agency remains committed to
ongoing strategic restructuring, with
the reorganization process actively
underway and targeted for completion
by December twenty twenty seven.
As part of this transition, N C U A has
offered, and continues to offer, temporary
promotions to address critical vacancies
and maintain operational continuity.
All efforts are conducted in
strict adherence to Executive
Orders and O P M guidance.
Operational improvements include
simplifying policies, refining processes,
aligning staff with strategic priorities,
and modernizing tools and technology.
The twenty twenty six budget has
authorized twenty three new hires to
support N C U A's ongoing transformation.
As we eliminate redundancies and
strengthen our core mission, we
remain dedicated to ensuring a stable
and strategic future for both our
workforce and the organization.
On strategic planning.
Every four years, N C U A develops a
comprehensive strategic plan that serves
as a roadmap for the agency's priorities
and initiatives for the next five years.
The plan we finalized earlier this
year also aligns with the President's
Management Agenda, which sets priorities
for the entirety of the executive branch.
The twenty twenty six Annual Performance
Plan outlines N C U A's specific
performance targets and objectives for
the first year of the twenty twenty six
to twenty thirty N C U A Strategic Plan.
The annual plan breaks down the broader,
longer-term vision into actionable
goals, detailing measurable outcomes
and key performance indicators that
help track the agency's progress.
By aligning daily operations with
strategic priorities, N C U A ensures
its resources are focused on enhancing
credit union safety and soundness,
fostering consumer protection,
and promoting financial stability.
Regular assessment of these outcomes
enables the agency to adjust strategies
as needed, maintain accountability,
and demonstrate the impact of its work.
This concludes the document.
If your credit union could use assistance
with your exam, reach out to Mark Treichel
on LinkedIn or at Mark Treichel dot com.
This is Samantha Shares, and
we thank you for listening.