Compliance Blog

Posted by Anthony Demangone

Recently, NCUA issued Legal Opinion Letter 09-1022, which discusses whether funds invested through a placement service would gain pass-through insurance from the NCUSIF.  NCUA responds with a simple yes, but clarifying that such a service would likely only work for non-member municipal government deposits.  That's right, non-member deposits.  Here's what NCUA said, in part:

FICUs could participate in a share placement service similar to CDARS but it would most likely be feasible only for funds from "public units," which includes states, municipalities, and political subdivisions. 12 C.F.R. §745.1(c). Although, generally, NCUSIF coverage only extends to member accounts, federal credit unions, and we believe most state-chartered credit unions, may accept funds from public units or government depositors without regard to membership. 12 U.S.C. §§1752(5), 1757(6).For purposes of NCUSIF coverage, nonmember public unit accounts are insured as member accounts. 12 C.F.R. §745.1(b).  Emphasis added.

That's a part of the FCU Act and NCUA regulations that some in our industry forget.  Each and every "public unit" is eligible, which includes states, municipalities and political subdivisions.  So, if you are every looking for deposits, this might be fertile ground to investigate.  Note that there are limits, which are spelled out in the regulation that governs such deposits.