National Credit Union Share Insurance Fund - Funding, Premiums and Dividends

Funding, Premiums and Dividends

In 1970 Congress approved and President Richard M. Nixon signed Public Law 91-206 (see 12 U.S.C. §§ 1781–1790(c)), 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.