Please comment! Template letter below to help meet Oct. 8 deadline
David Savoie, CEO, LaCorp
The National Credit Union Administration (NCUA) is currently conducting its 2025 regulatory review under the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA), and LaCorp has submitted a compelling comment letter advocating for the elimination of regulation 704.8(k). This outdated rule has become a significant barrier to efficient credit union operations, and we believe it’s time for our industry to unite in support of meaningful regulatory reform.
The Problem with 704.8(k)
Regulation 704.8(k) currently prohibits corporate credit unions from accepting investments from any single member or nonmember credit union if those investments would exceed 15% of the corporate’s moving daily average net assets (MDANA). While this rule was implemented with good intentions following the 2008 financial crisis, it has become an outdated and counterproductive limitation that actively undermines the credit union system’s efficiency. In essence, it’s a solution looking for a problem.
Daily Operational Challenges: Each year, up to 20 of our credit unions might need to transfer deposits out of the credit union system and into lower-yielding Federal Reserve Excess Balance Accounts or other depositories solely because of this regulation.
This requirement reduces available liquidity within our cooperative system while penalizing institutions that are acting prudently with their funds.
Why This Rule No Longer Makes Sense
704.8(k) is a vestige of the post-U.S. Central era, originally designed to prevent undue influence by large depositors in a centralized corporate system that no longer exists. Today’s environment is fundamentally different:
Proven Safety During Suspension: During the COVID-19 crisis, NCUA wisely issued temporary forbearance on this rule through December 2020. No adverse outcomes were reported, confirming that this regulation no longer serves a compelling supervisory purpose.
Changed Governance Structure: The centralized corporate credit union structure has been replaced by a member-owned governance model with one-member-one-vote principles, ensuring fair representation regardless of deposit size.
No Evidence of Abuse: Since the rule’s enactment over a decade ago, there have been no documented incidents where a credit union has exerted inappropriate influence on a corporate through deposit levels. The feared problems simply haven’t materialized.
The Real-World Impact: When Regulation Hurts Its Intended Beneficiaries
The irony of regulation 704.8(k) is that it undermines the very purpose corporate credit unions are meant to serve. Corporates exist to provide liquidity solutions and financial services to our members, particularly during times of need. However, this regulation creates a regressive liquidity cap that becomes more restrictive precisely when credit unions need liquidity solutions most.
Liquidity Constraints: The rule forces credit unions to move funds outside the cooperative system, reducing the capital available for lending and services within the credit union network.
Competitive Disadvantage: Credit unions are pushed toward commercial alternatives that may offer lower returns and less favorable terms than what they could receive within the credit union system.
System Inefficiency: The regulation creates artificial barriers that prevent the natural flow of capital where it’s needed most within the credit union community.
Louisiana Corporate’s Recommendation: Complete Elimination
In our comment letter to NCUA, we have respectfully urged the Board to eliminate Section 704.8(k) entirely. This recommendation aligns with Executive Order 13771’s deregulatory objectives and would reduce regulatory burden while improving system efficiency.
If complete elimination isn’t feasible, we support the Corporate Credit Union Alliance’s alternative proposal to revise the limit to allow for the greater of:
- 15% of MDANA (current rule)
- 200% of total capital, or
- A de minimis threshold of $50 million
This alternative would address the most problematic aspects of the current regulation while maintaining some level of concentration oversight.
How to Support This Crucial Change
The NCUA regulatory review process provides a critical opportunity for the credit union community to advocate for sensible regulatory reform. We encourage all credit unions to consider submitting their own comment letters supporting the elimination or substantial revision of regulation 704.8(k).
You will find a template comment letter with instructions on how to use it below (or linked) to make it easier for you; you can edit it to your liking or you’re welcome to write a distinct one. Click here to post your comment letter on 704.8(k) before the Oct. 8 deadline!
Key Points to Include:
- How the regulation forces you to move funds outside the credit union system
- The operational burden of managing deposit limits
- The lack of evidence that this regulation prevents actual problems
- Support for Louisiana Corporate Credit Union’s position
Moving Forward Together
The credit union system thrives when regulations support our cooperative principles rather than create artificial barriers. Regulation 704.8(k) has outlived its usefulness and now actively harms the system it was meant to protect. By working together and making our voices heard during this regulatory review, we can help ensure that NCUA regulations support a vibrant, efficient credit union system that serves our members’ best interests.
LaCorp is committed to advocating for regulatory changes that benefit our entire credit union community. We encourage you to join us in supporting the elimination of this outdated regulation and help build a more efficient, competitive credit union system for all credit unions.
The comment period closes on October 8, 2025—time is running out to make your voice heard!
For assistance with submitting comments or questions about this regulatory issue, please contact LaCorp CEO David Savoie at david@lacorp.com.
Template Comment Letter Supporting Elimination of NCUA Regulation 704.8(k)
Instructions for Use:
1. Replace bracketed placeholders with your credit union’s information
2. Add specific dollar amounts or examples where indicated
3. Submit in the Federal Register using Docket# NCUA-2024-0014
4. Deadline: October 8, 2025
[Date]
Ms. Melane Conyers-Ausbrooks, Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, Virginia 22314-3428
Via: Federal eRulemaking Portal (https://www.regulations.gov), Docket# NCUA-2024-0014
RE: Regulatory Review (2025) – Support for Eliminating 12 CFR 704.8(k)
Dear Ms. Conyers-Ausbrooks:
[Your Credit Union Name] respectfully submits this comment in strong support of eliminating NCUA regulation 704.8(k), which imposes an outdated 15% limit on deposits from individual credit unions to corporate credit unions. This regulation is counterproductive and forces credit unions to move funds outside the cooperative credit union system and into lower-yielding alternatives, directly undermining the liquidity management solutions that corporate credit unions are designed to provide. The regulation was implemented over a decade ago under different market conditions and governance structures that are no longer relevant today.
The predicted concerns that 704.8(k) was designed to mitigate simply have not materialized, as evidenced by the successful temporary forbearance during COVID-19 when no adverse outcomes occurred despite the suspension of this rule. The regulation creates a regressive liquidity cap that is most restrictive precisely when credit unions need liquidity solutions most, and member credit unions rely on corporates for funding solutions. The member-owned governance structure with one-member-one-vote principles already provides adequate protection against undue influence, making this concentration limit redundant while creating artificial competitive distortions that benefit larger corporate credit unions over smaller ones.
We urge the NCUA Board to eliminate Section 704.8(k) entirely as part of this regulatory review process. This action would reduce regulatory burden, improve system liquidity and allow corporate credit unions to better fulfill their statutory purpose of serving as reliable funding sources for their member credit unions. The elimination of this outdated regulation would strengthen the credit union system by keeping more capital within our cooperative network where it can benefit credit union members rather than being diverted outside the credit union system.
Alternatively, we ask if 704.8(k) is not eliminated, we support revision to allow a limit based on the greater of (1) 15% of MDANA, (2) 200% of total capital or (3) a de minimis threshold of $50 million.
Thank you for considering our comments on this important regulatory issue.
Sincerely,
[Name]
[Title]
[Your Credit Union Name]