The National Credit Union Administration Board today approved a proposed regulation  on federal credit union public unit and non-member shares.  Section 107 of the Federal Credit Union Act authorizes federal credit unions to accept shares deposited by non-member public entities such as state and local governments and also authorizes federally-chartered Low-Income Designated Credit Unions (LICUs) to accept shares deposited by non-member legal entities and natural persons.  The proposed rule, if finalized, would revise Section 701.32 of NCUA’s regulations to increase a credit union’s ability to hold non-member shares to an amount equal to 50 percent of its total member shares and retained earnings, up from the currently applicable limit of the greater of 20 percent of the credit union’s total shares or $3 million dollars.

NCUA’s proposal requests comments specifically on whether the agency should retain the $3 million dollar minimum limit or provide a special exemption for small LICUs.  Director of the Office of Examination and Insurance Larry Fazio said that credit unions of all sizes would benefit from the proposal but that it would be especially helpful for small credit unions, even without a $3 million dollar minimum limit, because smaller credit unions typically find it harder to borrow externally versus raising funds using shares.  NCUA Board Member Todd Harper stated that he hoped that credit unions, credit union trade associations and state credit union supervisors would file comments specifically on whether the agency should retain the $3 million dollar minimum limit.

The proposal will be open for a 60-day public comment period following its publication in the Federal Register.