How the NCUA Protects CU Deposits

Banking with a credit union? Chances are there’s a placard in the lobby or on the financial institution’s website that says "Federally insured by the NCUA." Most consumers probably won’t notice, but they should.

The National Credit Union Administration (NCUA) is an independent federal agency that insures and regulates all deposit products offered by federally chartered and most state-chartered credit unions. This agency is one of the leading financial regulators within the United States federal government.

According to the agency’s website, "the mission of the NCUA is to provide, through regulation and supervision, a safe and sound credit union system, which promotes confidence in the national system of cooperative credit." The agency accomplishes their mission in a capacity that focuses on consumer protection. Similar to the Federal Deposit Insurance Corporation (FDIC) that regulates traditional banks, the NCUA offers insurance for deposit accounts (e.g., checking account, savings accounts, certificates of deposit, and other investment accounts) for up to $250,000 per account per institution member.

More specifically, the insurance for these accounts derives from the National Credit Union Share Insurance Fund, based on legislation passed by Congress in the 1970s. The majority of the monies invested in the Share Insurance Funds are paid from member credit unions with a large majority of the fund invested in U.S. Treasury securities.

"The Share Insurance Fund insures individual accounts up to $250,000, and a member’s interest in all joint accounts combined is insured up to $250,000," the agency states. "The Share Insurance Fund separately protects IRA and KEOGH retirement accounts up to $250,000." After the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the $250,000 insurance limit was permanently established.

Like banks, credit unions can still offer a variety of other financial services. For example, the NCUA, as is with the FDIC, can’t cover life insurance policies, stocks, bonds, Treasury bills, or annuities. Remember that IRAs, revocable trust accounts of varying types, and KEOGH plans are insured.

Further, the agency–and the backing legislation–orders the federal government to provide coverage with the full backing of the government’s financial capability. Due to this, credit union members "have never lost even a penny of insured savings at a federally insured credit union."

NCUA received its authority after the Bureau of Federal Credit Unions–the agency’s statutory precursor–was overwhelmed with the regulation and required financial insurance. The Share Insurance Fund was the financial and legal sourcing for the creation of the NCUA as an agency. Under the current status of policy, the agency is virtually the same as the FDIC.

For example, the FDIC regulates and insures all banking institutions while the NCUA does the same practices with the credit union institutions all over the country. To better understand the similarities, checking accounts at banks and credits unions both receive insurance for up to $250,000.