The FDIC instills confidence between banks and consumers. However, there are other confidence-worthy financial institutions besides just banks.
A credit union is another type of financial institution. If you recall from previous lessons, credit unions are like banks; however, they are member-owned, allowing for loans and credits to be given out with lower interest rates. Now, suppose you are a member of a credit union, and it fails. What will happen to your money? There must be some government agency or Act that will protect it.
Well, thanks to the National Credit Union Association (NCUA), your money in credit unions is insured, and it will be given back to you if the credit union fails. So, what exactly is the NCUA?
The National Credit Union Association (NCUA) was established in 1970 as an independent federal agency. They regulate all federally insured credit unions, insuring all deposits and protecting all members. The NCUA is like the FDIC in that its main purpose is to protect consumers from failing financial institutions—in this case, credit unions.
So, what does the NCUA do to promote confidence between credit unions and their members? In the table below, the left column explains some of the things the NCUA does. Click each item in column 1 to learn more about the features of the NCUA.
The NCUA created the National Credit Union Share Insurance Fund, through which all savings accounts, checking accounts, money market accounts, and certificates of deposit within a credit union are insured for up to $250,000. |
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All credit unions are examined and supervised for safety, reliability, and consumer protection/security throughout the year. Also, as a member of the Federal Financial Institutions Examination Council, the NCUA helps in developing uniform principles, standards, and report forms, as well as promoting uniformity in the supervision of all credit unions. |
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When a credit union is failing or has failed, the NCUA is responsible for its orderly resolution. As the insurer of the credit union's deposits, this includes giving all members of the failed credit union their insurance (up to the $250,000 limit). Not only that, the NCUA will also assume the task of selling the assets of the failed credit union along with settling any debts they have. |
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When a credit union is failing, the NCUA may step in to take control of it. This is known as a receivership. When this occurs, the NCUA will make all future decisions for the credit union. |
Question
Now you know about both the FDIC and NCUA. What is the main difference between the two?
The difference is the financial institutions that they insure and supervise. The FDIC focuses primarily on banks and the NCUA focuses primarily on credit unions.
