With the surge of deposits at credit unions as Bank Transfer Day approaches, the NCUA has advised its examiners on how this activity could impact credit union finances.
In the message to examiners, NCUA notes that “a sharp increase in deposits around the event’s Nov. 5 target date may temporarily depress a credit union’s net worth ratio, but the call report allows credit unions to calculate their net worth ratios in one of two ways. They can use “point-in-time” assets or a rolling average of assets, and the latter method may offer relief in the short term.”
The rolling-average-assets method was included so net worth calculations are more equitable to credit unions that see large payroll deposits on the last day of a quarter, or that have seasonal fluctuations (such as at teachers credit unions). “Credit unions can opt to use an averaging method and we should take into consideration the potentially transient nature of some of these deposits.”
How long the averaging method helps depends on how “sticky” the deposits are, the Agency noted. “Since this is a rolling average, the longer the deposits stay, the less relief these alternative calculations will provide.”
However, the NCUA added, many of these new members may stay with their new credit unions. If the new members, and their money, remain in the credit union several months from now, "capital retention plans should be updated to include this new factor," the NCUA said.
The net worth calculation methods are described in section 702.2 of the NCUA Rules and Regulations.