U.S. Sens. Alex Padilla (D-CA) and Kevin Cramer (R-ND) introduced legislation that would allow credit unions to purchase central liquidity facility (CLF) capital stock for a specific subset of members rather than for all members for the next five years.
The bill, S. 5183, would amend the Federal Credit Union Act to provide a sunset for certain ways credit unions may be agent members of the National Credit Union Administration Central Liquidity Facility.
The bill has the backing of the National Association of Federally-Insured Credit Unions (NAFCU).
“NAFCU thanks Senators Padilla and Cramer for introducing bipartisan legislation which would offer credit unions greater flexibility and ample liquidity resources as they continue to brace economic headwinds,” NAFCU President and CEO Dan Berger said. “We have urged lawmakers to make CLF enhancements permanent since the CARES Act and will continue to do so to allow credit unions to best serve their 134 million members.”
Both Padilla and Cramer have long advocated for Congress to include provisions that would make CLF enhancements permanent in the FY2023 National Defense Authorization Act (NDAA). Both chambers of Congress are still working on the NDAA, but the final text is expected to be released this week.
“Congress created the Central Liquidity Facility in 1978 to improve the general financial stability of credit unions by serving as a liquidity lender to credit unions experiencing unusual or unexpected liquidity shortfalls,” Padilla said. “Unfortunately, under current law, smaller credit unions often do not have access to the critical tool that could help them address liquidity shortfalls, especially amid higher interest rates.”
National Credit Union Administration Chairman Todd Harper recently testified before the House and Senate, highlighting its efforts to maintain the safety and soundness of the credit union industry. Harper, in his testimony, reiterated to lawmakers the importance of making CLF flexibility permanent to ensure credit unions, especially smaller institutions, have access to resources for future emergencies.
NAFCU echoed similar sentiments in its correspondence with the Senate Banking Committee, writing that these enhancements give the NCUA a “vital tool to ensure the credit union system has access to a critical contingent liquidity source as it responds to the COVID-19 pandemic and beyond.”