(July 2, 2021) Pennsylvania credit unions are applauding the passage of state legislation prohibiting the transfer of monies from the state’s Banking Fund to pay for state government operations other than that of the state financial institution supervisor (including examinations) or for the resolution of troubled institutions.
The CrossState Credit Union Association (CrossState, which represents Pennsylvania credit unions) said the legislation strengthens the state charter and provides for “consistent safety and soundness of the banking industry” in the state. CrossState worked with Pennsylvania banking trade groups to enact the bill.
In Pennsylvania, CrossState pointed out in a release, state-chartered credit unions and banks pay semi-annual assessments to the PA Department of Banking and Securities (DoBS), which are then deposited into the Banking Fund to pay for the operations of the department and examination and regulation of state-chartered institutions. If needed, the fund can also be used to liquidate a financially distressed, non-federally insured institution using the fund’s Institution Resolution Restricted Account (IRRA).
According to CrossState, over the last two years two transfers were made from the Banking Fund to the state’s General Fund to supplement the budgets of other governmental agencies.
“As a result of Act 39 of 2021 (the legislation signed into law), future transfers out of the fund are prohibited if the intent of the transfer is unrelated to the regulation of financial institutions and the protection of their customers,” the association stated.
CrossState President and CEO Patrick Conway said the legislation was strongly supported by the state’s credit unions. “We join our colleagues at other financial institutions in recognizing the need to fund the activities of DoBS, and this new law ensures that member funds will only be used for that stated purpose going forward,” he said.
NASCUS President and CEO Lucy Ito thanked the Pennsylvania association and acknowledged the leadership of Banking Secretary Richard Vague of DoBS on behalf of state credit union supervisors. “What Pennsylvania has accomplished is a terrific example for other states to protect their exam and resolution funds for the credit unions and banks that have paid into them. Congratulations to CrossState, the state banking trade associations, and DoBs for their effective collaboration.”