DCUC Urges Congress to Make Central Liquidity Facility (CLF) Expansion Permanent
Today, the Defense Credit Union Council, DCUC, sent a letter to Senate Democrat Leader, the Honorable Chuck Schumer; Senate Republican Leader, the Honorable John Thune; Speaker of the House, the Honorable Mike Johnson; and House Minority Leader, the Honorable Hakeem Jeffries, urging Congress to make the Central Liquidity Facility (CLF) expansion a standalone priority in any upcoming must-pass legislation.
In the letter, DCUC emphasized the essential role the CLF plays as a liquidity backstop for credit unions, managed by the National Credit Union Administration (NCUA). The CLF has been a vital tool for credit unions during periods of financial stress, providing smaller institutions in particular with the resources needed to continue serving their members in times of crisis. By making this expanded access permanent, Congress can help ensure credit unions of all sizes can maintain financial stability, particularly in uncertain economic times.
DCUC listed the benefits of the CLF Expansion, to include enhanced liquidity access during economic uncertainty, financial stability for the broader financial system, support for military families, critical support for small and community credit unions, and proactive financial preparedness. DCUC also highlighted how CLF reform and expansion supports credit unions commitment to communities, prevents future financial crises, encourages healthy market competition and increased access to affordable credit, and offers greater regulatory flexibility in managing liquidity within the credit union system.
DCUC strongly advocates for making the CLF expansion permanent to ensure credit unions can continue to serve their communities, support local economies, and reinforce overall financial stability. This extension is especially critical for defense credit unions dedicated to serving and supporting our nation’s military personnel and veterans.
NCUA Chairman Todd Harper expresses the administration's support in his live testimony for the House Committee on Financial Services’ hearing, titled, “Oversight of Prudential Regulators.” The hearing is scheduled for today at 10:00 AM Eastern. In his testimony, Harper states:
“A credit union’s ability to effectively deal with liquidity risk in all economic environments, especially during times of systemic stress and reduced liquidity, underscores the importance of the NCUA’s Central Liquidity Facility (CLF) to individual credit unions and the broader credit union system.
The CLF currently has 431 credit union members of varying asset sizes, representing 9.3 percent of all institutions within the credit union system.4 These credit unions have access to approximately $21.7 billion in contingent liquidity funding from this federally backed source.
Under the NCUA’s regulations, credit unions with assets of $250 million or more are required to have access to a contingent federal liquidity source—the CLF, the Federal Reserve’s Discount Window, or both—as part of their contingency funding plan. Credit unions with less than $250 million in assets, while not required to have a membership with a contingent federal liquidity source, must identify external sources as part of their policies or contingency funding plans.
In December 2022, the CLF’s temporary statutory enhancements that facilitated the agent membership of corporate credit unions—credit unions providing payment and other financial services to consumer credit unions—expired.5 At that time 3,323 consumer credit unions with less than $250 million in assets, or approximately 67 percent of all credit unions, lost access to approximately $27.5 billion in contingent liquidity through the CLF.
To address this issue, the NCUA Board has repeatedly and unanimously asked Congress for permanent statutory authority to allow corporate credit unions and other agent members of the CLF to purchase capital stock for a subset of the credit unions they serve. These statutory adjustments will make the CLF a more affordable option for corporate credit unions to subscribe to the CLF on behalf of their smaller credit union members while also providing greater access to liquidity for more credit unions. The Congressional Budget Office has scored the CLF reforms at no cost to the taxpayer.”
DCUC urges Congress to pass this essential reform as a standalone measure, recognizing the importance of a permanent CLF expansion for the continued health of the credit union system and the financial readiness of military and veteran families. DCUC also stressed that any attempts to attach this measure with unrelated priorities could risk fragmenting the credit union industry.