The Defense Credit Union Council (DCUC) has engaged the Senate Committee on Banking, Housing, and Urban Affairs ahead of the hearing, “Evaluating Perspectives on Deposit Insurance Reform,” reiterating the importance of ensuring small business deposits are adequately protected and that credit unions receive full parity with banks in deposit insurance coverage and emergency authorities.
In a letter to Chairman Tim Scott and Ranking Member Elizabeth Warren, DCUC provided comments ahead of the discussion and commended the Committee for including Hanscom Federal Credit Union’s President & CEO Peter Rice as a key witness on behalf of credit unions and their 144 million members nationwide.
“[DCUC’s] mission is to advocate for the interests of credit unions that serve America’s servicemembers and their families, and the issues before the Committee profoundly affect not only those institutions, but all credit unions and the communities they support,” wrote Jason Stverak, DCUC Chief Advocacy Officer. “We commend you for examining deposit insurance reforms, and we stand ready to be a constructive resource as you consider improvements.”
“Yesterday’s confirmation of Hanscom FCU’s testimony at the hearing is a tremendous win for two reasons,” said Anthony Hernandez, DCUC President/CEO. “First, it highlights the impact of our members and the credit union mission. DCUC’s advocacy is designed for moments like this…to ensure that credit unions are a part of key discussions that evaluate how financial institutions serve the American public. We knew banks would be testifying, so we made sure credit unions were represented, too.”
Hernandez added, “Second, this underscores the willingness of Congressional leaders to hear directly from local financial institutions that are helping small businesses and communities thrive. Our team is working closely with Hanscom to support tomorrow’s hearing and celebrate this shared achievement. We are confident that Peter’s testimony will deliver valuable insights and perspectives that reflect the strength and commitment of credit unions nationwide.”
Detailed Overview of DCUC’s Letter
Closing the Deposit Insurance Gap for Business Accounts
DCUC noted how the current $250,000 insurance limit for both consumer and business accounts is inadequate for modern business needs.
“Many small companies must hold balances well above $250,000 simply to cover monthly payroll and vendor expenses, meaning any funds above $250,000 are uninsured and at risk if the institution fails,” the letter noted. “This reality was made painfully clear during the banking turmoil of March 2023, when the sudden failure of several regional banks left countless startups and small businesses worried they wouldn’t make payroll because their balances far exceeded insured limits. The status quo deposit insurance limit leaves too many small businesses’ operating funds exposed to loss through no fault of their own.”
DCUC strongly supports targeted reforms to increase deposit insurance for business operating accounts — up to $20 million for community financial institutions under $250 billion in assets.
“This targeted higher coverage for operating accounts is a sensible modernization of our deposit insurance system. It closes a major gap in protection and will strengthen small businesses’ confidence that every dollar they deposit for employee paychecks and key expenses is safe and available when needed.”
Parity Between Banks and Credit Unions
DCUC’s letter also called attention to necessary regulatory parity.
“Any deposit insurance reforms should explicitly avoid [past] pitfalls by empowering NCUA to provide comparable coverage on credit union deposits in lockstep with FDIC’s coverage for bank deposits. Parity in both everyday insurance limits and extraordinary emergency measures will remove any doubt that credit union deposits are ‘second class.’”
Phased Implementation to Protect NCUSIF
Recognizing the costs of expanded coverage, DCUC encouraged a gradual rollout.
“Phasing in the higher coverage over several years would give the NCUSIF time to adjust and accrue necessary reserves from premiums, rather than forcing a sudden spike in premiums or one-time assessments on credit unions.”
Coupling Deposit Reform with Small Business Lending Capacity
DCUC also urged the Committee leaders to address outdated restrictions on credit union lending.
“If the goal is to holistically support America’s small businesses, deposit insurance reform should be coupled with action to remove outdated barriers that limit small businesses’ access to credit from community lenders,” DCUC wrote.
DCUC recommended easing or removing the statutory Member Business Lending cap that prevents most credit unions from lending more than 12.25% of their assets to small businesses.
“This cap severely restricts the amount of capital that credit unions can provide to local entrepreneurs and small firms – even when they have the capacity and member demand to do more,” the letter stated.
Since 2018, DCUC has led the credit union industry’s advocacy in support of the bipartisan Veterans Member Business Loan Act (VBMLA), which would exempt loans made to veteran-owned small businesses from this cap.
“By allowing credit unions to lend freely to veteran entrepreneurs without counting against the cap, Congress would immediately open up new sources of financing for a community that represents approximately 1.76 million businesses, employs over 5 million Americans, and generates nearly $1 trillion in revenue.”
A Call to Strengthen Main Street
“Modernizing deposit insurance while expanding access to credit will directly strengthen America’s small businesses, including those founded by veterans,” says Stverak. “Ensuring that small businesses’ working capital is fully insured — and that credit unions can provide the financing they need to grow — will enhance the stability of Main Street enterprises and local economies.”
DCUC reaffirmed its commitment to being a constructive partner in these reforms by providing data, coordinating direct perspectives from its member credit unions, and offering technical feedback on implementation.