PRIVATE DEPOSIT 

INSURANCE

Credit Unions Largely 

Complied with 

Disclosure Rules, but 

Rules Should Be 

Clarified

Report to Congressional Committees

March 2017

GAO-17-259

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-17-259, a report to 

congressional committees

March 2017

PRIVATE DEPOSIT INSURANCE

Credit Unions Largely Complied with Disclosure 

Rules, but Rules Should Be Clarified

What GAO Found

About 2 percent of credit unions (125) have private deposit insurance, which is 

provided by one company—American Share Insurance (ASI). Regulatory and 

other assessments have suggested that ASI’s reserves have been adequate and 

that the company has had a strong ability to cover present and future losses for 

the credit unions it insures. The most recent examination of ASI by its primary 

regulator (Ohio Department of Insurance) determined that ASI’s reserves for 

losses were adequate and appropriate and consistent with legal requirements. 

An independent actuarial firm hired by ASI reported that it had a strong ability to 

cover losses under different economic scenarios. The Ohio regulator and the 

actuarial firm both noted risk factors that could affect ASI’s financial condition,

including changes in macroeconomic conditions or major losses by the largest 

credit unions it insures. In the event of financial difficulties, Ohio law allows ASI 

to tap into additional sources of funding, including lines of credit and special 

assessments from its insured credit unions.

Privately insured credit unions largely complied with the Bureau of Consumer 

Financial Protection (CFPB) requirements to disclose that they do not have

federal deposit insurance. For instance, 45 of 47 credit unions GAO visited 

displayed required disclosures at teller windows (see fig.), and 99 of 102 

websites GAO reviewed included the disclosure on their main Internet page, as 

required. However, 7 of 17 credit unions with drive-through windows that GAO 

visited did not have disclosure signs at these windows. Additionally, printed 

materials (such as brochures and flyers) GAO reviewed from 8 of 36 credit 

unions did not include disclosures. The regulations require all advertising to 

include a disclosure, but do not define what constitutes advertising. In some 

cases, disclosure signs or text size were too small to be easily read, or were not 

placed conspicuously. CFPB’s regulations on disclosures for privately insured 

credit unions do not specify signage dimensions or font size. Without clear 

disclosure requirements, state credit union supervisors and credit unions may 

not be consistent in how they interpret disclosure requirements and some

consumers may not be informed that their deposits are not federally insured. 

Figure: Example of Disclosure at a Privately Insured Credit Union

View GAO-17-259. For more information, 

contact Alicia Puente Cackley at (202) 512-

8678 or cackleya@gao.gov.

Why GAO Did This Study

The Federal Deposit Insurance Act 

requires privately insured credit unions 

to disclose to consumers that they do 

not have federal deposit insurance and

CFPB has implemented regulations on 

these requirements. The Fixing 

America’s Surface Transportation Act 

includes a provision for GAO to review

private deposit insurers and privately 

insured credit unions’ compliance with 

disclosures. This report (1) discusses

regulatory and other assessments of

ASI, the sole private insurer, and (2) 

examines the level of compliance with 

disclosure requirements for privately 

insured credit unions. GAO reviewed 

documentation from and interviewed 

federal and state regulators, ASI 

management, and ASI’s third-party

actuarial firm. GAO reviewed certain

key methods and assumptions used by 

the actuarial firm. GAO also analyzed

regulatory ratings (2006–2015) and 

selected financial data (2011–2015) on

privately and federally insured credit 

unions. In addition, GAO reviewed 102

websites for all privately insured credit 

unions that had websites, conducted 

unannounced site visits at 47 credit 

unions (selected based largely on 

asset size and geography), and

reviewed printed materials from 36 of 

the credit unions it visited that had 

materials readily available.

What GAO Recommends

GAO recommends that CFPB issue 

guidance for privately insured credit 

unions to clarify whether drive-through 

windows require disclosure, describe

what constitutes clear and conspicuous 

disclosure, including minimum signage 

dimensions and font size, and explain

and provide examples of which 

communications are advertising. CFPB 

agreed with these recommendations.
Page i GAO-17-259 Private Deposit Insurance

Letter 1

Background 4

Regulatory and Other Assessments Indicate ASI Has Had 

Adequate Reserves and Strong Claims-Paying Ability 9

Credit Unions We Reviewed Largely Complied with Disclosure 

Requirements, but Some Disclosure Provisions Lack Specificity 21

Conclusions 27

Recommendations for Executive Action 28

Agency Comments 28

Appendix I Objectives, Scope, and Methodology 30

Appendix II Reasons Credit Unions Chose Private or Federal Deposit Insurance 37

Appendix III Comments from the Consumer Financial Protection Bureau 39

Appendix IV GAO Contact and Staff Acknowledgments 41

Tables

Table 1: Percentage of Privately and Federally Insured Credit 

Unions, by Asset Size, 2015 20

Table 2: Geographic Distribution of Privately Insured Credit 

Unions, 2015 33

Figures

Figure 1: Number and Percentage of Federally and Privately 

Insured Credit Unions and Total Insured Deposits, 2015 5

Figure 2: Privately and Federally Insured Credit Unions with 

Satisfactory Regulatory Ratings (CAMEL ratings 1 or 2), 

2006–2015 19

Figure 3: Example of Drive-Through Windows with Disclosure 

Signage 22

Figure 4: Example of Disclosure Signage at a Teller Window 23

Contents
Page ii GAO-17-259 Private Deposit Insurance

Figure 5: Example of Credit Union Website in Which Font for 

Disclosure Is Smaller Than That Used on Rest of Page 24

Abbreviations

ASI American Share Insurance

CDFI community development financial institution 

CFPB Bureau of Consumer Financial Protection 

FAST Act Fixing America’s Surface Transportation Act

FHFA Federal Housing Finance Agency

FHLBank Federal Home Loan Bank 

FTC Federal Trade Commission

IRIS Insurance Regulatory Information System

NAIC National Association of Insurance Commissioners

NASCUS National Association of State Credit Union

 Supervisors

NCUA National Credit Union Administration

This is a work of the U.S. government and is not subject to copyright protection in the 

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Page 1 GAO-17-259 Private Deposit Insurance

441 G St. N.W.

Washington, DC 20548

March 29, 2017

The Honorable Michael Crapo

Chairman

The Honorable Sherrod Brown

Ranking Member

Committee on Banking, Housing, and Urban Affairs

United States Senate

The Honorable Jeb Hensarling

Chairman

The Honorable Maxine Waters

Ranking Member

Committee on Financial Services

House of Representatives

Deposit insurance enhances the stability of financial institutions and helps 

protect depositors in the event of bank or credit union failures.1 The vast 

majority of U.S. credit unions have federal deposit insurance, which is 

provided by the National Credit Union Administration (NCUA) and backed 

by the full faith and credit of the U.S. government. However, in certain 

states, some credit unions also have the option of choosing a private 

insurer.2 In 2015, a private company, American Mutual Share Insurance 

Corporation, or American Share Insurance (ASI), provided deposit 

insurance for 125 credit unions (about 2 percent of all credit unions).3 By 

law, any credit union that does not have federal deposit insurance must 

clearly and conspicuously inform consumers—through signage on 

 1

Deposit insurance for credit unions is sometimes referred to as share insurance. For this 

report, we use the term deposit insurance. 

2

By law, federally chartered credit unions must have deposit insurance provided by 

NCUA. In most states, state law requires state-chartered credit unions to also have federal 

deposit insurance, according to the National Association of State Credit Union Supervisors 

(NASCUS). NASCUS also told us that in some states, state law permits credit unions to 

have private deposit insurance, although in some of these states no credit unions have 

chosen to do so. There are nine states where private deposit insurance is permitted and at 

least some credit unions have chosen to use it: Alabama, California, Maryland, Idaho, 

Illinois, Indiana, Ohio, Nevada, and Texas. For nearly all banks, primary deposit insurance 

is provided by the Federal Deposit Insurance Corporation.

3

The company’s legal name is American Mutual Share Insurance Corporation, but it does 

business as American Share Insurance or ASI. 

Letter
Page 2 GAO-17-259 Private Deposit Insurance

premises, on its websites, and in its advertising—that the institution is not 

federally insured.4

The Fixing America’s Surface Transportation Act (FAST Act) includes a 

provision for GAO to review private deposit insurers and privately insured 

credit unions’ compliance with certain disclosures.5 This report (1) 

discusses regulatory and other assessments of ASI, which is the sole 

private deposit insurer, and (2) examines the level of compliance with 

disclosure requirements for privately insured credit unions. For the 

purposes of this report, the regulatory and other assessments of ASI 

include information on loss reserves, capital adequacy, and the credit 

unions ASI insures. This report does not compare ASI’s reserves and 

capital adequacy to those of NCUA’s National Credit Union Share 

Insurance Fund.

To gather information about ASI, we reviewed documentation, such as 

examination reports and state legal requirements, and interviewed its 

primary regulators (Ohio Departments of Insurance and Commerce), as 

well as state regulators in the other eight states in which ASI operates. 

Additionally, we reviewed ASI’s annual reports, underwriting policies, and 

documentation about the credit unions the company insures, and we 

interviewed ASI management. We reviewed reports from the third-party 

actuarial firm that ASI retains, and interviewed the actuarial firm’s staff.6

We did not conduct our own independent assessment of ASI’s capital 

adequacy. However, our internal actuarial staff reviewed the third-party 

actuarial firm’s modeling approach and certain key methods and 

assumptions for the firm’s assessment of ASI’s capital adequacy (which 

incorporates loss reserves as part of a broad definition of capital). 

Additionally, we reviewed the regulatory ratings, commonly known as 

CAMEL ratings, for privately and federally insured credit unions, and used 

financial data from SNL Financial to analyze selected financial indicators 

 4

Section 43(b) of the Federal Deposit Insurance Act requires disclosure by depository 

institutions lacking federal deposit insurance. The section is codified at 12 U.S.C. § 

1831t(b).

5

Pub. L. No. 114-94, § 82002, 129 Stat. 1312, 1796 (2015). Some credit unions in Puerto 

Rico are insured by a quasi-governmental entity––the Public Corporation for the 

Supervision and Insurance of Cooperatives—and these credit unions are not included in 

the scope of this report. 

6

ASI retains a third-party firm to prepare an independent actuarial analysis of the 

adequacy of its capital, including loss reserves, and to provide an annual actuarial 

opinion. We refer to this firm as the actuarial firm throughout this report. 
Page 3 GAO-17-259 Private Deposit Insurance

for privately and federally insured credit unions.7 We assessed the 

reliability of the CAMEL ratings and SNL Financial data by requesting 

information about the underlying data and how they are collected, and by 

conducting data reliability testing. We found the data to be sufficiently 

reliable for the purposes of our review.

To determine compliance with disclosure requirements, we reviewed the 

Federal Deposit Insurance Act provisions regarding disclosure 

requirements, as well as the corresponding regulations (known as 

Regulation I). We conducted 47 unannounced site visits at a 

nonprobability sample of credit unions (41 visits to unique credit unions 

and 6 visits to an additional branch of some of the 41 credit unions), 

selected to achieve variation in asset size, geographic location, main 

retail or branch locations, and urban and nonurban locations. We 

reviewed the websites of all 102 privately insured credit unions that had 

them, and obtained and reviewed examples of printed materials from 36 

credit unions we visited that had them readily available. We also 

interviewed representatives from the Bureau of Consumer Financial 

Protection (CFPB) and state credit union supervisory authorities about 

credit union compliance with disclosure requirements. For comparison 

purposes, we reviewed NCUA’s disclosure requirements for federally 

insured credit unions. Finally, we reviewed our previous work in this 

area.8

We conducted this performance audit from February 2016 to March 2017 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. Appendix I contains additional 

information on our objectives, scope, and methodology.

 7

CAMEL ratings consist of an assessment of a credit union’s capital adequacy, asset 

quality, management, earnings, and liquidity. The CAMEL rating system is designed to 

take into account and reflect all significant financial, operational, and management factors 

that regulators assess in their evaluation of a credit union’s performance and risk profile. 

SNL Financial is a private service that aggregates and disseminates comprehensive 

regulatory financial data on financial institutions, among other information. Data for yearend 2015 were the most recently available when we conducted our review.

8

GAO, Federal Deposit Insurance Act: FTC Best among Candidates to Enforce Consumer 

Protection Provisions, GAO-03-971 (Washington, D.C.: Aug. 20, 2003).
Page 4 GAO-17-259 Private Deposit Insurance

Credit unions can be federally or state-chartered, which determines their 

primary regulator for safety and soundness and also their options for 

deposit insurance. Federally chartered credit unions are regulated by 

NCUA and must be federally insured by the National Credit Union Share 

Insurance Fund, which is administered by NCUA and provides up to 

$250,000 of insurance per depositor for each account ownership type.9

State-chartered credit unions are usually regulated by credit union 

supervisors in their respective state. These credit unions can be federally 

insured (and thus also supervised) by NCUA or, in some states, can 

choose to be privately insured.10 As of February 2017, ASI was the only 

company providing private primary deposit insurance.11 ASI provides up 

to $250,000 of insurance per account (rather than per depositor for each 

ownership type, as with NCUA).12 Deposit insurance covers deposit 

products such as checking and savings accounts, money market deposit 

accounts, and certificates of deposit. It does not cover other financial 

products, such as investments in stocks, bonds, or mutual funds.

 9

In addition to NCUA’s coverage for individual accounts, options are available for 

additional deposit insurance coverage, such as retirement or joint accounts. 

10State law determines whether a state-chartered credit union can provide members with 

private deposit insurance in lieu of federal deposit insurance. A state-chartered credit 

union that is federally insured is supervised by both the chartering state and NCUA. 

According to representatives from the Idaho state credit union supervisor, credit unions in 

their state, in the past, could choose not to provide deposit insurance to members and one 

credit union does not offer deposit insurance. We excluded this credit union from our 

scope because this report focuses on credit unions with private deposit insurance. 

11Other nonfederal (private and state-based) deposit insurance systems had been in place 

in prior years, but no longer exist. For additional information on these other deposit 

insurance systems, see Stephanie O. Crofton, Luis G. Dopico, and James A. Wilcox, 

“American Share Insurance: The Sole Surviving Private Deposit Insurer in the United 

States,” Essays in Economic & Business History, vol. 28 (2010). 

12While this report focuses on primary deposit insurance coverage––up to $250,000––

both federally and privately insured credit unions can choose to offer additional coverage 

to members, through what is known as excess deposit insurance. Excess deposit 

insurance is solely provided by the private market. ASI wholly owns a subsidiary known as 

Excess Share Insurance Corporation that offers excess deposit insurance to credit unions. 

We took into account this wholly owned subsidiary in our discussion of ASI’s financial 

condition. 

Background
Page 5 GAO-17-259 Private Deposit Insurance

The vast majority of credit unions are federally insured. As seen in figure 

1, in 2015, there were more than 6,000 federally insured credit unions 

with more than $1 trillion in insured deposits, and 125 privately insured 

credit unions with $13 billion in insured deposits.

Figure 1: Number and Percentage of Federally and Privately Insured Credit Unions 

and Total Insured Deposits, 2015

The mix of asset sizes is largely similar for federally and privately insured 

credit unions, and the majority of both have assets of less than $100 

million. Between 2011 and 2015, the number of federally and privately 

insured credit unions declined by about 15 percent, due largely to 

mergers and liquidations. Some credit unions chose to convert between 

private and federal deposit insurance and appendix II contains 

information about the reasons that some credit unions switch insurers.

ASI is a private, not-for-profit company, headquartered in Ohio. The 

company is governed by Ohio law and licensed by the Ohio Department 

of Insurance, and its primary regulators are the Ohio Departments of 

Insurance and Commerce, although regulators in the other eight states in 

Overview of Credit Union 

and Deposit Insurance 

Markets

American Share Insurance
Page 6 GAO-17-259 Private Deposit Insurance

which ASI operates also have an oversight role.13 ASI has provided 

deposit insurance since 1974 and the company is owned by the credit 

unions for which it provides deposit insurance. The company does not 

normally charge premiums, which are common in the insurance industry, 

but instead requires its credit unions to maintain a capital contribution with 

the company, adjusted annually, equal to a rate of 1.3 percent of the 

credit union’s total insured deposits. In addition, ASI has the authority to 

charge special premium assessments under certain conditions with 

regulator approval, as it did in 2009–2013.14

ASI is overseen by a board of directors that is made up of six chief 

executives from the credit unions it insures, as well as one ASI 

management representative. Quarterly, according to ASI management, 

ASI’s board of directors meets to review and monitor the company’s 

financial statements, investment activities, risk management practices, 

information technology issues, and sales and marketing activities. An 

independent auditor annually audits and renders an opinion on ASI’s 

consolidated financial statements prepared in accordance with generally 

accepted accounting principles. Additionally, ASI retains an independent 

actuarial firm to conduct a capital adequacy study (at least every 3 years), 

annually review and help estimate loss reserves, and render an annual 

actuarial opinion on the adequacy of its loss reserves.

Federal law requires that any depository institution that does not have 

federal deposit insurance clearly and conspicuously disclose that the 

institution is not federally insured.15 CFPB and the Federal Trade 

Commission (FTC) are the federal entities responsible for enforcing these 

requirements.16 In December 2011, CFPB issued an interim final rule 

restating the implementing regulation, which had been promulgated by 

 13ASI is licensed as a credit union share guaranty corporation by the Ohio Department of 

Insurance. Ohio Revised Code Chapter 1761 establishes powers and authorities 

governing credit union guaranty corporations. ASI is also governed by the regulations 

found in the Ohio Administrative Code Chapter 1301:9.3.

14Ohio Rev. Code Ann. § 1761.10 (D)(1).

1512 U.S.C. § 1831t(b).

16CFPB inherited the rulemaking authority from FTC, which, prior to CFPB’s existence, 

had jurisdiction over this area. Title X of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act transferred rulemaking authority for a number of consumer 

financial protection laws from seven federal agencies to CFPB as of July 21, 2011.

Federal Law and 

Regulation I
Page 7 GAO-17-259 Private Deposit Insurance

FTC.17 This regulation, known as Regulation I, contains the disclosure 

requirements for credit unions that do not have federal deposit insurance. 

CFPB published a final rule in April 2016, which adopted its 2011 interim 

final rule without changes.

Regulation I requires disclosure that an institution does not have federal 

deposit insurance (1) at locations where deposits are normally received 

(stations or windows) except enumerated exceptions, (2) on the 

institution’s main Internet page (website), (3) in all advertising except 

enumerated exceptions, and (4) in periodic statements and account 

records.18 Regulation I generally requires depository institutions to obtain 

a written acknowledgment from depositors that the institution does not 

have federal deposit insurance.

The FAST Act amended the Federal Home Loan Bank Act to permit 

privately insured credit unions to apply for membership in a Federal 

Home Loan Bank (FHLBank) and, if approved, obtain the benefits of 

membership, including access to loans (known as advances). The 

FHLBank System is a government-sponsored enterprise, composed of 11 

regional banks.19 Federally insured credit unions have been allowed to 

apply for membership since 1989; other members of the FHLBank 

 17Disclosure Requirements for Depository Institutions Lacking Federal Deposit Insurance 

(Regulation I), 76 Fed. Reg. 78126 (Dec. 16, 2011) (codified at 12 C.F.R. Part 1009). 

According to CFPB staff, the December 2011 interim final rule was largely adopted from 

FTC’s prior rule without substantive changes (16 C.F.R. Part 320). 

18For the first category, the regulation includes exceptions for automated teller machines 

and point of sale terminals. 12 C.F.R. § 1009.4(a)(1). For the fourth category, in addition 

to disclosing that the institution is not federally insured, the institution must also disclose 

that “if the institution fails, the Federal Government does not guarantee that depositors will 

get back their money.” 12 U.S.C § 1831t(b)(1); 12 C.F.R. § 1009.3.

19The FHLBank System represents 11 districts, with FHLBanks located in Atlanta, Boston, 

Chicago, Cincinnati, Dallas, Des Moines, Indianapolis, New York, Pittsburgh, San 

Francisco, and Topeka. Eligible entities may become members of an FHLBank, generally 

in the district in which they have their principal place of business. 

FAST Act and Federal 

Home Loan Bank System
Page 8 GAO-17-259 Private Deposit Insurance

System include commercial banks, thrifts, and insurance companies.20

The FHLBank of Cincinnati approved ASI as a member in June 2011.

The Federal Housing Finance Agency (FHFA) regulates the FHLBanks 

and issued a proposed rule in September 2016 to implement provisions of 

the FAST Act.21 By law, certain types of prospective FHLBank members 

must have at least 10 percent of their assets in residential mortgage loans 

to be eligible. As of December 31, 2015, FHFA estimated that 78 of the 

125 privately insured credit unions met this eligibility criterion.22 As of 

December 31, 2016, the FHLBanks had approved 16 privately insured 

credit unions for membership.

 20The Housing and Economic Recovery Act of 2008 expanded membership eligibility to 

community development financial institutions (CDFI) in 2008. Pub. L. No. 110-289, § 

1206, 122 Stat. 2654, 2787 (2008). Regulations state that CDFI credit unions are included 

within those eligible for membership and define a CDFI credit union as a state-chartered 

credit union that has been certified as a CDFI by the CDFI Fund and that does not have 

federal deposit insurance. 12 C.F.R. § 1263.1, 1263.6(a).

21Federal Home Loan Bank Membership for Non-Federally-Insured Credit Unions, 81 Fed. 

Reg. 66545 (Sept. 28, 2016). 

2212 U.S.C. § 1424(a)(2). Year-end 2015 data were the most recently available at the time 

of our review.
Page 9 GAO-17-259 Private Deposit Insurance

The Ohio Department of Insurance’s most recent examination of ASI, 

which covered 2008–2012, did not identify any deficiencies in ASI’s 

financial condition and determined that ASI’s reserves for losses were 

consistent with Ohio’s legal requirements and were adequate and 

appropriate.23 According to Ohio Department of Insurance staff, the 

department has not identified any issues and was not aware of any 

problems with ASI’s loss reserves in at least the past 10 years.24 They 

noted that ASI is classified as a nonpriority insurer by the department, 

which means that the company is considered low-risk and does not 

require enhanced oversight. This determination was based on factors 

such as ASI’s Insurance Regulatory Information System (IRIS) ratios and 

management competency.25 As a result of this classification, the 

department conducts full-scope examinations of ASI every 5 years, rather 

than annually or every 3 years as conducted for insurers deemed riskier.

 23Loss reserves are an estimate of liability or provision in an insurer’s financial statement, 

indicating the amount the insurer expects to pay for losses incurred, but not yet reported, 

and reported claims that have not been paid.

24We requested information for the past 10 years, including the most recent examination. 

We did not request or obtain information relating to earlier examinations; department staff 

told us findings from previous examinations carry forward to the next examination.

25State insurance regulators participating in committees of the National Association of 

Insurance Commissioners (NAIC) developed IRIS to assist state insurance departments in 

targeting resources to those insurers in greatest need of regulatory attention. The ratios 

and trends are used to identify insurers likely to experience financial difficulties. NAIC is 

the U.S. standard-setting and regulatory support organization created and governed by 

the chief insurance regulators from the 50 states, the District of Columbia, and five U.S. 

territories. Through NAIC, state insurance regulators establish standards and best 

practices, conduct peer review, and coordinate their regulatory oversight.

Regulatory and Other 

Assessments Indicate 

ASI Has Had 

Adequate Reserves 

and Strong ClaimsPaying Ability

Regulators Have Not Cited 

Concerns about ASI
Page 10 GAO-17-259 Private Deposit Insurance

Ohio Department of Insurance staff told us that as part of their full-scope 

examinations every 5 years, the examination team reviews ASI’s audited 

financial statements, analyzes estimates for loss reserves, and evaluates 

any risks to the company by reviewing legal issues, corporate 

governance, and management. In particular, the department’s actuary 

performs an analysis of ASI’s information to derive the department’s own 

estimate for ASI’s loss reserves. The department compares its derived 

estimate to ASI’s held reserves, as well as to the range of estimates 

reported by ASI’s third-party actuarial firm. Staff said that if the 

department were to identify significant differences in the estimates, it 

would request additional information from ASI to understand the reasons 

for the differences. Additionally, the department uses the IRIS ratios to aid 

in evaluation of the adequacy of ASI’s loss reserves. According to 

representatives from the National Association of Insurance 

Commissioners (NAIC), the procedures the department uses for 

assessing ASI’s capital, including its loss reserves estimates, are 

consistent with NAIC’s guidelines for conducting such assessments.

Ohio Department of Insurance staff also told us that on an annual basis 

they review the statement of actuarial opinion of ASI’s loss reserve 

estimates (as rendered by the third-party actuarial firm and discussed 

later in this report) and ASI’s audited financial statements, and also 

compute financial ratios. According to the staff, as part of this review, 

analysts review ASI’s capital position and monitor ASI’s asset quality to 

ensure they did not deteriorate significantly in a given period. Under Ohio 

law, ASI is required to maintain at least $5 million in capital, and as of 

December 31, 2015, ASI’s capital was roughly $219 million.26 In addition, 

Ohio Department of Insurance staff said they consider any risks that 

could affect ASI’s financial condition. For example, they said they 

evaluate risk in terms of growth, underwriting, how the company invested 

its assets, and any legal concerns. In addition, the department analyzes 

the risk-based capital ratio. They also said that a company’s risk-based 

capital ratio must be at least 200 percent of its calculated authorized 

control level risk-based capital.27 From 2009 through 2015, according to 

 26This number is based on statutory accounting practices. Later in the report, we refer to 

$218 million in funds available to pay claims as identified by the actuarial firm. According 

to ASI management, this amount is based on generally accepted accounting principles 

and was derived by subtracting cash and investments held by the Excess Share 

Insurance Corporation from the consolidated cash and investments.

27According to NAIC’s model law, authorized control-level risk-based capital is the number 

determined under the risk-based capital formula. 
Page 11 GAO-17-259 Private Deposit Insurance

examination records from the Ohio Department of Insurance, ASI’s riskbased capital ratio was well above this standard.28 Ohio Department of 

Insurance staff told us that ASI management is very transparent about 

disclosing risk that new credit unions may pose to the company. The staff 

said that they engage in quarterly discussions with ASI management 

about the company’s quarterly financial statements and the credit unions 

for which ASI is considering providing deposit insurance coverage.

Ohio Department of Insurance staff said that their concern with ASI, as 

with any insurer, generally has been the risk posed by macroeconomic 

issues. For example, they stated fluctuations in the economy could pose 

significant concerns for insurers such as ASI. Therefore, a decline in the 

economy could have a significant (negative) impact on a company like 

ASI. The staff further noted that while the frequency of claims for losses 

for ASI would be low, the severity of such losses could potentially be high, 

which could pose a risk to the company. According to ASI management, 

roughly 2 percent of its privately insured credit unions failed during or 

since the 2007–2009 financial crisis (as compared to roughly 2 percent of 

federally insured credit unions, according to NCUA).29 In 2009, ASI 

reported that almost all of its loss expense was related to just two of its 

insured credit unions, both in Nevada. One of these credit unions merged 

with another.30 The second troubled credit union had approximately $1 

billion in total assets when it received assistance from ASI.31 Department 

staff told us that during and just after the financial crisis, they monitored 

ASI more frequently and met monthly with ASI management to discuss 

the company’s exposures and potential losses, but the department never 

determined there was a need to conduct an additional full-scope 

examination.

 28According to department staff, ASI’s risk-based capital ratio also exceeded the 200 

percent standard for a number of years before 2009, but we did not obtain information 

prior to that year.

29According to ASI management, the 2 percent includes purchase and assumptions (i.e., 

assisted mergers) and there were no involuntary liquidations of credit unions. NCUA 

defines failures as involuntary liquidations and assisted mergers.

30According to ASI management, the merger was through a purchase and assumption 

transaction in which ASI guaranteed the performance and collection of loans and real 

estate owed to the acquiring credit union. 

31ASI can provide assistance to a troubled credit union by advancing it funds. ASI 

reported that the institution had fully repaid the advanced funds with interest, and 

according to ASI management there was no net loss to ASI.
Page 12 GAO-17-259 Private Deposit Insurance

In addition to the Ohio Department of Insurance’s oversight, the Ohio 

Department of Commerce annually performs a risk-based safety and 

soundness examination of ASI in collaboration with the eight other state 

credit union supervisors that regulate privately insured credit unions. 

However, the Ohio Department of Commerce could not share with us the 

results of these examinations because, as interpreted by the department, 

it is prohibited by law from providing details about its examination findings 

to third parties other than those specified in the regulations.32 According 

to Ohio Department of Commerce staff, their annual safety and 

soundness examination of ASI focuses on risk areas similar to those 

reviewed during the examination of a credit union. As a part of this 

process, the Ohio Department of Commerce reviews ASI’s audited 

financial statements, statement of actuarial opinion, and reports from 

ASI’s internal system used to monitor insured credit unions. Ohio 

Department of Commerce staff told us that on a quarterly basis, 

examiners review quarterly financial statements and monitor any troubled 

credit unions that ASI insures.

As well as participating in the Ohio Department of Commerce’s annual 

examination of ASI, the eight other state credit union supervisors told us 

that they monitor ASI’s financial condition on an annual or quarterly 

basis.33 This process generally involves a review of ASI’s annual audited 

or quarterly unaudited financial statements and its actuarial reports. None 

of the eight state supervisors with whom we spoke raised concerns about 

ASI’s financial condition at the time of our review. But one state credit 

union supervisor expressed concern that during volatile economic times, 

ASI might not be able to cover losses once it had exhausted its capital 

because ASI is not backed by the full faith and credit of the U.S. 

government and has no access to state guaranty funds. According to the 

National Conference of Insurance Guaranty Funds—whose funds provide 

protection for various property and casualty lines of insurance written by 

its member insurers––private deposit insurers are not covered. 

Additionally, representatives from the state credit union supervisors also 

told us that none of the states in which ASI operates, including Ohio, had 

a state guaranty fund to assist in covering losses or credit union member 

deposits if ASI ran into financial difficulties. However, in the event of 

 32Ohio Admin. Code §1301:9-3-15(E).

33According to Ohio Department of Commerce staff, not all of the eight states in which ASI 

also operates participate in the annual review each year, but usually five or more states 

participate.
Page 13 GAO-17-259 Private Deposit Insurance

potential impairment of ASI’s funding, Ohio law allows ASI to charge a 

special assessment, with regulator approval, against the credit unions it 

insures.34

Moreover, FHFA reviews information about ASI as part of its oversight of 

the FHLBanks. As noted earlier, ASI is a member of the FHLBank of 

Cincinnati and bank representatives told us that they monitor ASI’s 

financial condition by reviewing ASI’s annual audited financial statements, 

statutory quarterly financial filings, and reports on ASI’s loss reserves. 

FHLBanks protect against credit risk on advances by requiring members 

to pledge collateral. Representatives from the FHLBank of Cincinnati told 

us ASI, like all FHLBank members (including privately insured credit 

unions), must pledge collateral to receive advances. According to FHFA 

staff, while FHFA may review ASI information as part of its supervision of 

FHLBanks, FHFA has no supervisory authority over ASI and no plans to 

independently assess the company’s financial condition. The FAST Act 

does require ASI to provide FHFA a copy of its annual audit. The audit 

must be conducted by an independent auditor and must include an 

assessment by the auditor that ASI follows generally accepted accounting 

principles and has set aside sufficient reserves for losses. This FAST Act 

requirement allows FHFA to review the independent auditor’s opinion to 

confirm that ASI has met these requirements. FHFA staff told us FHFA 

planned to use the ASI audited financial statements to prepare for its next 

annual examination of the FHLBank of Cincinnati.

ASI has several processes in place to mitigate risk and help prevent and 

control losses to the company. ASI management told us that applicant 

credit unions undergo an insurability assessment that includes a review of 

the credit union’s financial data, corporate governance, and CAMEL 

rating, and an evaluation of its operating policies and procedures.35

Additionally, the company continuously monitors the financial condition of 

the credit unions the company insures. ASI management said that 

quarterly they compare their credit unions against federally insured credit 

unions in terms of capital adequacy, earnings, and liquidity. The company 

conducts an examination of about 70 percent of its credit unions annually, 

 34Ohio Rev. Code Ann. § 1761.10(C)(1). According to ASI management, the company has 

not made such an assessment. 

35ASI management told us the company applies more stringent underwriting guidelines to 

credit union applicants with assets above $1 billion because the Ohio Department of 

Insurance views these credit unions as a potential risk to ASI. Further, ASI’s internal policy 

is to refrain from marketing to credit unions with assets of more than $2 billion.
Page 14 GAO-17-259 Private Deposit Insurance

and the rest on a 2–3 year cycle. ASI management noted that they 

conduct most of their examinations jointly with state credit union 

supervisors. For credit unions with at least $100 million in assets, ASI has 

a process of enhanced monitoring, which includes quarterly reviews, as 

well as on-site reviews annually or semiannually. As needed, ASI can 

issue a corrective action, such as advancing funds to an insured credit 

union on a short-term basis to aid in the credit union’s liquidity needs.

ASI retains an independent actuarial firm to conduct analyses for the 

company. The actuarial firm conducts

• a study of the adequacy of ASI’s capital every 3 years, which looks at 

the company as a whole and its ability to pay present and future 

claims for losses experienced by the credit unions it insures, under 

different economic scenarios;36 and

• an annual study of ASI’s loss experience to help estimate loss 

reserves and render an annual statement of actuarial opinion on the 

adequacy of its loss reserves.37

The four most recent capital adequacy studies, which covered calendar 

years 2009–2015, indicated that ASI’s ability to pay claims was strong.38

The 2010 capital adequacy study—conducted near the end of the 

financial crisis—indicated ASI’s ability to pay claims was strong, but it 

 36The actuarial firm defines capital adequacy as the adequacy of capital, loss reserves, 

member deposits, retained earnings, reinsurance, and lines of credit, taken as a whole. 

According to ASI management, in April 2011, the actuarial firm prepared an additional 

study, off the 3-year cycle, at the request of the company to evaluate the impact of an 

increase in the capital contribution rate and ASI’s plans to charge a special premium 

assessment. ASI management told us the company took both of these actions in response 

to the financial crisis. That study used ASI’s data and information as of December 31, 

2010. 

37Reserves for losses refer to estimates of unpaid losses and loss adjustment expense. 

The estimates include an actuarial central estimate, as well as estimates above and below 

the central estimate, which according to ASI management, form a range of possible 

expected losses.

38Willis Towers Watson, American Mutual Share Insurance Corporation: Actuarial 

Analysis of Capital Adequacy - Stress Scenarios (Minneapolis, Minn.: May 3, 2016); 

Towers Watson, American Mutual Share Insurance Corporation: Actuarial Analysis of 

Capital Adequacy - Stress Scenarios (Chicago, Ill.: Apr. 9, 2013); Actuarial Analysis of 

Capital Adequacy - Stress Scenarios (Chicago, Ill.: Apr. 26, 2011); and Actuarial Analysis 

of Capital Adequacy - Stress Scenarios (Chicago, Ill.: May 19, 2010). 

Independent Actuarial 

Reviews Found That ASI 

Had a Strong Financial 

Ability to Pay Claims 

under Different Scenarios

Capital Adequacy
Page 15 GAO-17-259 Private Deposit Insurance

also reported that ASI’s ability to pay claims had decreased.39 For the 

most recent capital adequacy study, the actuarial firm’s analysis found 

that ASI’s ability to pay claims was strong under each of three economic 

scenarios (expansion, recession, and depression).40 For example, the 

actuarial firm estimated the probability that ASI could withstand a 1-year 

and 5-year recession as 99.7 percent and 97.3 percent, respectively.41

According to staff from the actuarial firm, the capital adequacy study 

serves as a financial model to assist ASI management in its decision 

making. They noted ASI’s management is as important as the study’s 

findings because even with adequate capital, a company could fail based 

on mismanagement or fraud, which cannot be modeled.

According to staff from the actuarial firm, ASI could face difficulty paying 

claims for losses if one or more of its largest credit unions were to suffer 

severe losses. The firm reported that as of December 31, 2015, ASI had 

$218 million in assets (cash and investments) readily available to pay 

claims, but as of year-end 2015, 14 of its credit unions each had more 

than that amount in total insured deposits. However, the actuarial staff 

told us they factored this risk into their analysis and that the larger the 

credit union (by asset size), the smaller the probability of a severe loss 

(expressed as a percentage of the credit union’s total assets).

Additionally, the actuarial firm analyzed the capital adequacy of ASI’s 

wholly owned subsidiary, Excess Share Insurance Corporation, which can 

affect ASI’s financial condition because ASI offers it various funding 

sources and a guarantee. The actuarial firm’s 2016 study showed the 

subsidiary’s ability to pay claims under the three economic scenarios was 

strong.42 ASI management told us they believe the risk posed by its 

subsidiary to be small, and that multiple adverse events would have to 

occur simultaneously for it to impair ASI’s financial condition. To transfer 

 39Towers Watson, Actuarial Analysis of Capital Adequacy - Stress Scenarios (May 19, 

2010).

40Willis Towers Watson, Actuarial Analysis of Capital Adequacy - Stress Scenarios (May 

3, 2016). 

41Similarly, the firm estimated the probability that ASI could withstand a 1-year and 5-year 

depression as 99.5 percent and 96.6 percent, respectively.

42Willis Towers Watson, Excess Share Insurance Corporation: Actuarial Analysis of 

Capital Adequacy - Stress Scenarios (Minneapolis, Minn.: May 3, 2016). This study 

covered the period ending December 31, 2015.
Page 16 GAO-17-259 Private Deposit Insurance

some of this risk, the subsidiary carries a reinsurance policy for its excess 

insurance line of business.

The actuarial studies also noted that ASI has other sources of funding to 

help pay claims, including special assessments, lines of credit, and 

increases to the capital contribution rate it charges. For example, during 

and after the 2007–2009 financial crisis, ASI (1) charged its insured credit 

unions a special premium assessment each year in 2009–2013; (2) 

borrowed $22 million from its line of credit to pay initial claims in 2009 

(which according to ASI management was repaid in full within 6 months); 

and (3) increased the credit unions’ capital contributions rate in 2010, 

from a rate ranging between 1 percent and 1.3 percent to a rate of 1.3 

percent of total insured deposits, which ASI management told us 

enhanced the company’s capital adequacy.

Each of the actuarial firm’s annual loss reserve studies conducted during 

2011–2015 found that ASI’s reserves for losses were reasonable and 

consistent with amounts computed based on actuarial standards of 

practice, and met the requirements of Ohio insurance laws.43 ASI 

maintains a reserve for losses to cover its estimated unpaid liability for 

reported and unreported loss claims.44 To assist management with its 

determination of loss reserves, the actuarial firm annually analyzes ASI’s 

loss reserve experience and reviews the assumptions ASI uses to 

determine its reserves for losses. The reserve studies identified some 

potential risks—for example, the possibility that some of ASI’s credit 

unions could cancel their deposit insurance coverage and withdraw their 

capital contributions, which would reduce ASI’s capital (but also reduce its 

exposure to potential losses).

 43Willis Towers Watson, American Mutual Share Insurance Corporation: Analysis of 

Unpaid Loss and LAE as of December 31, 2015 (Minneapolis, Minn.: Feb. 25, 2016);

Towers Watson American Mutual Share Insurance Corporation: Analysis of Unpaid Loss 

and LAE as of December 31, 2014 (Minneapolis, Minn.: Feb. 25, 2015); American Mutual 

Share Insurance Corporation: Analysis of Unpaid Loss and LAE as of December 31, 2013

(Minneapolis, Minn.: Mar. 5, 2014); American Mutual Share Insurance Corporation: 

Analysis of Unpaid Loss and LAE as of December 31, 2012 (Chicago, Ill.: Mar. 7, 2013); 

and American Mutual Share Insurance Corporation: Analysis of Unpaid Loss and LAE as 

of December 31, 2011 (Chicago, Ill.: Mar. 15, 2012).

44According to the actuarial firm, losses generally arise from defaulted loans, investment 

losses, mismanagement, fraud, or embezzlement. 

Loss Reserves
Page 17 GAO-17-259 Private Deposit Insurance

In its 2016 loss reserve study, the actuarial firm stated that it did not 

believe that significant risks and uncertainties were present that could 

result in material adverse deviation of ASI’s loss reserves.45 The firm 

based its conclusion on the presence of certain favorable factors that 

offset the risks and uncertainties identified in previous years. These 

factors included the low ratio of the company’s held reserves to its capital, 

and that ASI’s held reserves were at the high end of the actuariallydetermined range of reserves estimated to be reasonable. However, the 

actuarial firm staff stated that the absence of such risks and uncertainties 

did not imply that factors could not be identified in the future that could 

have a significant influence on ASI’s reserves.

 45Willis Towers Watson, American Mutual Share Insurance Corporation: Analysis of 

Unpaid Loss and LAE as of December 31, 2015 (Feb. 25, 2016). This study covered the 

period ending December 31, 2015.
Page 18 GAO-17-259 Private Deposit Insurance

ASI’s risk profile depends in large part on the financial condition of the 

privately insured credit unions that it insures. We reviewed the CAMEL 

ratings (which regulators use to rate a credit union’s performance and risk 

profile) of privately insured credit unions, and compared them to those of 

federally insured credit unions.46 We found that, in the aggregate, 

privately and federally insured credit unions had similar CAMEL ratings 

during 2006–2015.47 For example, as seen in figure 2, roughly the same 

percentages of privately and federally insured credit unions were rated 

satisfactory (CAMEL ratings of 1 or 2). For both groups, the percentage of 

troubled credit unions (CAMEL ratings of 4 or 5) peaked in 2011 and then 

declined. These similarities remained roughly the same (for both 

satisfactory and troubled credit unions) when we reviewed the percentage 

of assets in credit unions by CAMEL rating rather than percentage of 

individual credit unions.48

 46CAMELS ratings consist of an assessment of a financial institution’s capital adequacy, 

asset quality, management, earnings, liquidity, and sensitivity to market risk. Most credit 

unions are not separately assessed on this last component. NCUA’s CAMEL rating 

system is designed to take into account and reflect all significant financial, operational, 

and management factors that field staff assess in their evaluation of a credit union’s 

performance and risk profile. Composite CAMEL ratings range from 1 to 5, with 1 being 

the best rating. Ratings of 1 or 2 indicate satisfactory condition, a rating of 3 reflects some 

degree of supervisory concern in one or more areas, a rating of 4 indicates that an 

institution generally exhibits unsafe or unsound practices, and a rating of 5 indicates 

extremely unsafe or unsound practices and conditions. NCUA refers to CAMEL 4 and 5 

credit unions collectively as “troubled credit unions.”

47CAMEL ratings are assigned (1) by NCUA for federally chartered, federally insured 

credit unions, (2) by both NCUA and the state credit union supervisory authority for statechartered, federally insured credit unions, and (3) by the state credit union supervisory 

authority for privately insured credit unions. We obtained CAMEL ratings only from NCUA 

for all federally insured credit unions (federally and state-chartered). While there may be 

some differences in how NCUA and each state credit union supervisory authority assign 

ratings, we solely present NCUA’s CAMEL ratings for federally insured credit unions 

(federally and state-chartered) to minimize limitations in comparisons of NCUA and state 

credit union supervisory authorities’ ratings. Nine state credit union supervisory authorities 

assign ratings to privately insured credit unions. We assumed these ratings were 

comparable in the aggregate with those of NCUA because 8 of the 9 supervisory 

authorities told us they follow the same standards and procedures as NCUA when 

assigning ratings to both federally and privately insured credit unions. Texas authorities 

told us they follow the Uniform Financial Institution Rating System adopted by the Federal 

Financial Institutions Examination Council, which includes an additional assessment of 

market sensitivity (which NCUA has not yet adopted). ASI does not assign CAMEL 

ratings, but the company told us it uses CAMEL ratings as part of its underwriting and 

ongoing monitoring for privately insured credit unions.

48The percentage of assets in troubled credit unions peaked in 2009 and 2010 for 

privately and federally insured credit unions, respectively, and then declined. 

Privately and Federally 

Insured Credit Unions Had 

Similar Regulatory 

Ratings, but Differed in 

Geographic and Deposit 

Concentration
Page 19 GAO-17-259 Private Deposit Insurance

Figure 2: Privately and Federally Insured Credit Unions with Satisfactory Regulatory 

Ratings (CAMEL ratings 1 or 2), 2006–2015

For further review, we also selected one indicator in each of five 

categories––capital adequacy, asset quality, loss coverage, profitability, 

and liquidity––regulators commonly use to assess the financial health of 

credit unions.49 The median values for all of these indicators were similar 

for privately and federally insured credit unions from 2011–2015.50

The sizes of privately and federally insured credit unions also were 

roughly similar. In 2015, the majority of insured credit unions had less 

than $100 million in total assets (see table 1). For privately and federally 

insured credit unions, respectively, the median total assets were roughly 

 49The specific indicators we reviewed were (1) net worth ratio, (2) delinquent loans ratio, 

(3) net charge-offs to average loans ratio, (4) return on average assets, and (5) liquidity 

ratio. We selected these indicators for further review because they had been previously 

identified by regulators as metrics to assess a credit union’s financial health and used in 

prior reports looking at credit unions. See appendix I for additional information.

50We analyzed these indicators using the median rather than the mean because means 

can be skewed by extremely high or low values.
Page 20 GAO-17-259 Private Deposit Insurance

$34 million and $27 million, and the median numbers of members were 

roughly 4,300 and 3,200.

Table 1: Percentage of Privately and Federally Insured Credit Unions, by Asset Size, 2015

Asset size Privately insured (n = 125) Federally insured

(n = 6,033)

Less than $100 million in total assets 74 75

More than $100 million, less than $500 million in total assets 18 17

More than $500 million in total assets 8 8

Total 100 100

Source: GAO analysis of SNL Financial data. | GAO-17-259

However, our analysis shows that privately insured credit unions have 

higher geographic and deposit concentration than federally insured credit 

unions, which can present risks. Specifically,

• Privately insured credit unions are much less geographically diverse 

than federally insured credit unions because they operate solely in 

nine states. Forty-two percent of ASI-insured credit unions are in Ohio 

and an additional 30 percent are in Illinois (18 percent) and Indiana 

(12 percent). This geographic concentration may create risks for ASI 

because economic downturns are sometimes concentrated in 

particular regions of the country. NCUA staff noted that previous 

private deposit insurers have failed mostly as a result of severe 

regional economic shocks (or in some cases a single major fraud).51

• The total insured deposits of privately insured credit unions are 

concentrated in a much smaller number of credit unions than for 

federally insured credit unions. In 2015, ASI’s 2 largest credit unions 

(by total assets) represented 15 percent of its total insured deposits, 

and its 10 largest represented 54 percent of its insured deposits. In 

comparison, NCUA’s 10 largest insured credit unions (by total assets) 

made up 15 percent of total insured deposits in 2015. This 

concentration of insured deposits may be viewed as a risk to ASI 

because, as discussed previously, ASI could face difficulty paying 

 51For additional information about failures of prior private deposit insurers see Stephanie 

O. Crofton, Luis G. Dopico, and James A. Wilcox, “American Share Insurance: The Sole 

Surviving Private Deposit Insurer in the United States,” Essays in Economic & Business 

History, vol. 28 (2010). 
Page 21 GAO-17-259 Private Deposit Insurance

claims for losses if one or more of its largest credit unions were to 

suffer severe losses. 

Privately insured credit unions we reviewed largely complied with 

requirements to disclose that they are not federally insured. But a lack of 

specificity in Regulation I provisions that relate to disclosure location 

(drive-through windows), format (signage dimensions and font size), and 

advertising (printed materials) may have contributed to some variations 

we saw in compliance with disclosure rules.

Disclosure signage at teller and drive-through windows. The 47 

privately insured credit unions we visited were largely in compliance with 

CFPB’s requirement for disclosures at each station or window where 

deposits are normally received.52 For example, 45 of the 47 credit unions 

displayed a disclosure at teller windows. Of the two that did not display 

signs at teller windows (both of which were small employer-based credit 

unions), one had a disclosure on the front door and the other had a 

disclosure on a bulletin board outside the credit union, but still within the 

employer’s building. However, 7 of the 17 credit unions we visited that 

had drive-through windows did not have disclosures at the window (see 

fig. 3). While Regulation I states disclosures are needed at each station or 

window where deposits are normally received, it does not specifically cite 

drive-through windows. In contrast, the regulation specifically excludes 

certain other places of deposit from requiring the disclosure. For example, 

it states that disclosure is not needed at automated teller machines or 

point-of-sale terminals. CFPB staff told us that, in their view, a plain 

reading of Regulation I would include a drive-through window as a 

“station or window where deposits are normally received,” and thus 

require disclosure.

 5212 C.F.R. § 1009.4. The disclosures that the institution is not federally insured are 

required at certain places at the principal place of business and all of its branches where 

the credit union accepts deposits or opens accounts. We conducted unannounced site 

visits at a nonprobability sample of 47 credit unions (selected primarily to represent a mix 

of asset sizes and geographic locations). The credit unions were located in California, 

Illinois, Maryland, and Ohio.

Credit Unions We 

Reviewed Largely 

Complied with 

Disclosure 

Requirements, but 

Some Disclosure 

Provisions Lack 

Specificity
Page 22 GAO-17-259 Private Deposit Insurance

Figure 3: Example of Drive-Through Windows with Disclosure Signage

We also observed that the dimensions and font sizes of the disclosure 

signage varied among credit unions, with some having signage too small 

to be easily read, or not placed conspicuously. At 28 of 47 credit unions 

we visited the signs measured smaller than 3 by 7 inches.53 The sign we 

commonly observed measured 2-1⁄4 inches by 4 inches, which is larger 

than a business card, but smaller than an index card (see fig. 4). 

Additionally, in more than half the credit unions we visited, we found the 

font size of the disclosures was too small to be easily read when standing 

at the teller window. Further, at 7 of 47 credit unions, disclosures were 

placed where they were not easily noticed. For example, one was placed 

on a windowsill across the room, another at a teller station covered with 

other materials, and another at the bottom of an 8 by 10 inch sign 

containing a lot of other information about the credit union’s policies.

 53We used 3 by 7 inches for comparative purposes because those are the dimensions of 

the signage provided by NCUA to federally insured credit unions, as discussed later in this 

report.
Page 23 GAO-17-259 Private Deposit Insurance

Figure 4: Example of Disclosure Signage at a Teller Window

CFPB does not provide official signage to privately insured credit unions 

and Regulation I does not specify signage dimensions or font size 

requirements. Instead, Regulation I states the disclosures must be “clear 

and conspicuous and presented in a simple and easy-to-understand 

format, type size, and manner” but does not provide definitions, 

parameters, or illustrative examples of what would constitute simple and 

easy to understand. By comparison, NCUA provides official signs to 

federally insured credit unions to display at each station or window where 

insured account funds or deposits are normally received.54 NCUA’s 

regulation notes credit unions should not alter the font size of the official 

sign when used for this purpose. The sign itself, which measures 3 by 7 

inches. can be ordered and downloaded from NCUA’s website.

Disclosures on websites. We also reviewed 102 privately insured credit 

union websites and found that almost all of these websites complied with 

CFPB’s requirement to disclose on their main Internet page that the 

institution is not federally insured.55 Three credit unions did not have the 

disclosure on their main Internet page (each of the three had the 

disclosure on a different page of its website). However, on many websites 

 5412 C.F.R. § 740.4.

5512 C.F.R. § 1009.4. At the time of our review, 102 of 125 privately insured credit unions 

had active websites. 
Page 24 GAO-17-259 Private Deposit Insurance

(28 of 99) the disclosures were not easily seen or readable. For example, 

the overall space the disclosure occupied or its placement next to or 

between colorful or larger graphics made it difficult to notice the 

disclosures in these cases. Additionally, we observed that more than half 

the websites (60 of 99) used a font size that was smaller than that used 

for the other text on the same webpage (see fig. 5).

Figure 5: Example of Credit Union Website in Which Font for Disclosure Is Smaller Than That Used on Rest of Page
Page 25 GAO-17-259 Private Deposit Insurance

CFPB’s Regulation I states that the website disclosures, like all other 

required advertising and premises disclosures, should be “clear and 

conspicuous and presented in a simple and easy to understand format, 

type size, and manner,” but CFPB does not define these terms or specify 

font size requirements for websites.56 In comparison, NCUA’s regulation 

for federally insured credit unions specifies that the disclosure must be in 

a size and print that is clearly legible and no smaller than the smallest font 

size used elsewhere.57

Disclosures in advertising (printed materials). On our visits to privately 

insured credit unions we obtained printed materials (such as brochures, 

promotional flyers, and newsletters which could be considered 

advertisements), and 8 of the 36 credit unions from which we obtained 

samples of printed materials had at least one item that did not contain a 

disclosure.58 Regulation I states “all advertisements” except those 

specifically enumerated must disclose a lack of federal deposit insurance, 

but the regulation does not define what constitutes an advertisement.59

CFPB staff told us the agency does not have any guidance or 

commentary on what constitutes “all advertisements.” In comparison, 

NCUA’s regulation for federally insured credit unions defines advertising, 

and also provides examples. In NCUA’s regulation, an advertisement is “a 

commercial message, in any medium, that is designed to attract public 

attention or patronage to a product or business.”60 Furthermore, NCUA’s 

regulation specifies that advertising includes print, electronic, or 

broadcast media, displays and signs, stationery, and other promotional 

material.61

 56As previously stated, CFPB inherited the rulemaking and enforcement authority for 

Regulation I from FTC and adopted FTC’s rule without substantive changes. CFPB staff 

noted that FTC has historically relied on the “clear and conspicuous” standard in its 

regulations of advertisements and advertisers.

5712 C.F.R. § 740.5(b).

58While we visited 47 privately insured credit unions, we obtained printed material from 36 

because printed materials were not always readily available. 

59The regulation notes a couple of exceptions that would not require a disclosure, such as 

small utilitarian items that do not mention deposit products or insurance, if inclusion of the 

notice would be impractical. 12 C.F.R.§1009.4(c)(2). 

6012 C.F.R. § 740.1(b).

6112 C.F.R. § 740.2.
Page 26 GAO-17-259 Private Deposit Insurance

Disclosures in periodic statements, account records, and signature 

cards. Representatives of all nine state credit union supervisors with 

whom we spoke told us that privately insured credit unions were generally 

compliant with the requirements to (1) disclose on periodic statements 

and certain other account records a lack of federal deposit insurance, and 

(2) obtain written acknowledgment from depositors on this lack of federal 

insurance, as is generally required.62 The state credit union supervisors 

said they checked a sample of periodic statements, account records, and 

signature cards for new accounts as part of their routine examinations of 

privately insured credit unions.

Reviews of compliance. Overall, compliance levels with disclosure 

requirements have improved since our 2003 review of privately insured 

credit unions, which included an assessment of their compliance with 

federal disclosure rules.63 In 2003, we found that 36 of 57 credit unions 

had the required disclosures on premises. Similarly, in 2003, 39 of 78 

websites and 93 of 227 printed materials we reviewed had the required 

disclosures.

CFPB has not had any findings, observations, or evaluations regarding 

privately insured credit unions’ disclosures.64 CFPB staff told us the 

agency has not received any complaints related to private deposit 

insurance. CFPB staff said they have reviewed privately insured credit 

unions’ websites at a very informal level and the websites seemed to be 

complying with Regulation I. As previously noted, CFPB shares 

enforcement authority for Regulation I with FTC.65 CFPB staff told us that 

 6212 C.F.R. §§ 1009.3 and 1009.5.

63GAO-03-971. For the 2003 review, we visited 57 credit unions in Alabama, California, 

Illinois, Indiana, and Ohio, reviewed websites, and obtained and reviewed printed 

materials from the credit unions we had visited. For our current review, we did not visit the 

same credit unions for reasons that include the changed composition of the group of 

privately insured credit unions. 

64CFPB’s prioritization process has not, to date, identified privately insured credit unions 

and their related disclosure requirements as a consumer-facing activity that poses 

sufficient risk to merit supervisory examination (to the extent such credit unions would be 

subject to such examination) or enforcement investigation. CFPB is required by statute to 

exercise its supervisory authority, in part, consistent with its assessment of risks posed to

consumers. 12 U.S.C. § 5514(b)(2). Pursuant to statute, the CFPB’s risk prioritization 

process takes into consideration a given institution’s overall asset size and transaction 

volume combined with other factors, including an evaluation of the risk posed to 

consumers by its consumer-facing activities and the extent to which such entities are 

subject to oversight by state authorities for consumer protection.

6512 U.S.C. § 1831t(f) and 12 C.F.R. §1009.7.
Page 27 GAO-17-259 Private Deposit Insurance

state credit union supervisors and attorneys general also have the 

authority to enforce Regulation I, as necessary.

The state credit union supervisors in the nine states with privately insured 

credit unions similarly told us that compliance with disclosure 

requirements has not been a problem in recent years. They said that their 

routine examinations of state-chartered credit unions check for 

disclosures on premises, on websites, in advertising materials, and, as 

noted earlier, by reviewing selected periodic statements, account records, 

and signature cards.66 They said that if examiners observe 

noncompliance with disclosure requirements, they cite it as an 

examination finding and expect the credit union to promptly correct the 

issue and display the proper signage or disclosure.

While we generally found that compliance levels were high, Regulation I 

may be interpreted and enforced differently by different credit unions and 

state regulators. Without clarity on whether or not drive-through windows 

are required to have disclosures, some credit unions may continue to not 

display them at these windows. Additionally, without more clarity or 

guidance around dimensions and font sizes for disclosures, the 

disclosures may be too small to be easily read or noticed. Further, there 

may continue to be confusion about what constitutes “advertising” and 

whether certain printed materials are required to include disclosures. As a 

result, the state credit union supervisors and the credit unions themselves 

may face challenges consistently monitoring and complying with 

Regulation I. In turn, credit union members may not always be 

consistently and adequately informed that deposits are not federally 

insured.

Deposit insurance helps protect depositors from losing their money in the 

event a financial institution fails. By law, any institution that does not have 

federal deposit insurance must clearly and conspicuously inform 

consumers that the institution is not federally insured and privately 

insured credit unions we reviewed largely complied with disclosure 

requirements. However, the instances we observed of missing 

disclosures or disclosures that were too small to be easily read or 

 66According to NASCUS, state credit union supervisors typically examine credit unions on 

a schedule. For example, while state law may require examinations of state-chartered 

credit unions every 24 months, the state credit union supervisors generally conduct 

examinations on a 12-18 month schedule.

Conclusions
Page 28 GAO-17-259 Private Deposit Insurance

inconspicuous suggest that the lack of specificity in some provisions of 

Regulation I has led to inconsistencies in interpretation. By clarifying 

Regulation I, CFPB would facilitate state credit union supervisor 

monitoring and credit union compliance and would better ensure that 

consumers were informed that their deposits are not federally insured.

We are making three recommendations to help state credit union 

supervisors and privately insured credit unions better interpret Regulation 

I and inform consumers when an institution is not federally insured. CFPB 

should issue guidance to (1) clarify whether drive-through windows 

require disclosures; (2) describe what constitutes clear and conspicuous 

disclosure, including minimum signage dimensions and font size for 

disclosures; and (3) explain and provide examples of which

communications are advertising.

We provided CFPB, FHFA, and NCUA with a draft of this report for review 

and comment. In its written comments, reproduced in appendix III, CFPB 

agreed with our recommendations. CFPB noted that the agency 

recognizes that providing guidance clarifying Regulation I may improve 

privately insured credit unions’ understanding of and compliance with the 

federal disclosure requirements. Additionally, CFPB stated that the 

agency intends to explore options that will most effectively provide 

guidance regarding Regulation I, such as issuing a bulletin that could be 

published in the Federal Register or posted on the agency’s website. 

CFPB, FHFA, and NCUA also provided technical comments, which we 

incorporated as appropriate. We also provided selected relevant portions 

of the draft to ASI, its third-party actuarial firm, the Ohio Departments of 

Insurance and Commerce, and the other eight state credit union 

supervisory authorities for their technical review, and we incorporated 

their comments as appropriate.

Recommendations for 

Executive Action

Agency Comments
Page 29 GAO-17-259 Private Deposit Insurance

We are sending copies of this report to the appropriate congressional 

committees, agencies, and other interested parties. In addition, this report 

will be available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

me at (202) 512-8678 or cackleya@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff who made key contributions to this 

report are listed in appendix IV.

Alicia Puente Cackley

Director, Financial Markets and Community Investment
Page 30 GAO-17-259 Private Deposit Insurance

This report (1) discusses regulatory and other assessments of American 

Share Insurance (ASI), the sole private deposit insurer, and (2) examines 

the level of compliance with disclosure requirements by credit unions that 

do not have federal deposit insurance. The Fixing America’s Surface 

Transportation Act (FAST Act) includes a provision for us to review 

private deposit insurers and privately insured credit unions’ disclosure 

compliance in the United States.1 Our scope includes the nine states that 

permit credit unions to use private deposit insurance and have credit 

unions that have chosen to do so: Alabama, California, Idaho, Illinois, 

Indiana, Maryland, Nevada, Ohio, and Texas. Some credit unions in 

Puerto Rico are insured by a quasi-governmental entity––the Public 

Corporation for the Supervision and Insurance of Cooperatives––and 

these credit unions are not included in the scope of this report. In 

addition, this report does not compare ASI’s reserves and capital 

adequacy to those of the National Credit Union Administration’s (NCUA) 

National Credit Union Share Insurance Fund because the two entities 

have different legal requirements and risk profiles, use different models to 

help estimate reserves, and use different assumptions and methods to 

help determine capital adequacy. Based on this, we limited the scope of 

the report to solely cover regulatory and other assessments of ASI, 

instead of an analysis or comparison of the two entities.

To gather information about ASI, we identified the company’s regulators 

and legal requirements and reviewed laws and regulations pertaining to 

the company. We reviewed Ohio law and implementing regulations, which 

establish the powers and authorities governing credit union guaranty 

corporations, such as ASI.2 We interviewed the company’s primary 

regulators (Ohio Departments of Insurance and Commerce), as well as 

representatives from the state credit union supervisors in the other eight 

states in which ASI operates.3 To determine how the Ohio Department of 

Insurance assessed ASI’s financial condition, we reviewed documentation 

such as the most recent examination report covering calendar years 

2008–2012 and financial analyses of ASI covering calendar years 2013–

 1

Pub. L. No. 114-94, § 82002, 129 Stat. 1312, 1796 (2015). 

2

Ohio Revised Code Chapter 1761 and Ohio Administrative Code Chapter 1301:9.3. A 

credit union guaranty corporation is a corporation licensed by the Ohio Department of 

Insurance to engage in the business of guaranteeing payment of a credit union share 

account of an individual member of a credit union.

3

We interviewed state supervisors in Alabama, California, Maryland, Idaho, Illinois, 

Indiana, Nevada, and Texas.

Appendix I: Objectives, Scope, and 

Methodology
Page 31 GAO-17-259 Private Deposit Insurance

2015. We also compared the department’s process with the guidelines 

recommended by the National Association of Insurance Commissioners 

(NAIC) and confirmed with NAIC staff that the department’s procedures 

were consistent with NAIC guidelines. Finally, we interviewed staff at the 

Federal Housing Finance Agency (FHFA), which oversees the Federal 

Home Loan Bank (FHLBank) System, and the FHLBank of Cincinnati (of 

which ASI is a member) to determine their oversight role with regard to 

ASI and to obtain information about the number and status of privately 

insured credit unions applying for membership to the FHLBanks.

We reviewed ASI’s annual reports and audited financial statements for 

2008–2015 and other documentation, such as the company’s investment 

policy, its examination and insurance policy, and its application form and 

process for credit unions seeking private deposit insurance. We 

interviewed ASI management about the company’s history, governance 

structure, regulatory and financial reporting requirements, underwriting 

policies, and capital and reserves requirements. We also reviewed 

reports from the third-party actuarial firm that ASI retains, including the 

firm’s analyses of ASI’s capital adequacy for 2009–2015 (conducted 

every 3 years), annual analyses of ASI’s unpaid loss and loss adjustment 

expense for 2011–2015, and annual statements of actuarial opinion for 

2011–2015, as well as the firm’s analysis of capital adequacy for ASI’s 

wholly-owned subsidiary for 2015. We interviewed the actuarial firm’s 

staff about their analyses related to these studies and obtained 

information about the assumptions and methods used. For the most 

recent capital adequacy study, our internal actuarial staff reviewed the 

actuarial firm’s modeling approach and certain key methods and 

assumptions, including those related to the three economic scenarios 

used in the study. Additionally, we inquired about the firm’s internal peer 

review process and steps taken to ensure the completeness and 

accuracy of the models used to assess ASI’s capital adequacy and 

reserves for losses. We did not conduct our own independent 

assessment of ASI’s capital adequacy and reserves for losses and 

therefore cannot make our own actuarial determination or opinion.

To review information about the credit unions that ASI insures, we 

reviewed CAMEL ratings for privately and federally insured credit unions 

for 2006–2015.4 We also used financial data from SNL Financial (2011–

 4

CAMEL ratings consist of an assessment of a credit union’s capital adequacy, asset 

quality, management, earnings, and liquidity. The CAMEL rating system is designed to 

take into account and reflect all significant financial, operational, and management factors 

that regulators assess in their evaluation of a credit union’s performance and risk profile. 
Page 32 GAO-17-259 Private Deposit Insurance

2015) to analyze selected financial indicators for privately and federally 

insured credit unions.5 We selected these financial indicators for further 

review because they had been previously identified by regulators as 

metrics to assess a credit union’s financial health and used in prior 

reports looking at credit unions.6 For our previous work, we had obtained 

information from NCUA on the indicators it typically uses to assess credit 

unions’ financial health and we selected one indicator in each of the 

following five categories: capital adequacy, asset quality, loss coverage, 

profitability, and liquidity.7 We analyzed data from SNL Financial in 

September 2016 for year-end 2011–2015. We presented median rather 

than the mean because means can be skewed by extremely high or low 

values. We assessed the reliability of the CAMEL ratings for privately and 

federally insured credit unions, as well as the SNL Financial data for the 

five financial indicators, by requesting information about the underlying 

data, how they are collected, and data reliability testing. We found the 

data to be sufficiently reliable for the purposes of our review.

To determine compliance with disclosure requirements, we identified 

disclosure requirements for credit unions that do not have federal deposit 

insurance by reviewing the Federal Deposit Insurance Act disclosure 

provisions and the Bureau of Consumer Financial Protection’s (CFPB) 

corresponding Regulation I.8 To review on-site disclosure requirements 

(at stations or windows), we selected a nonprobability sample of 53 

privately insured credit unions and conducted in-person, unannounced 

 5

SNL Financial is a private service that aggregates and disseminates comprehensive 

regulatory financial data on financial institutions, among other information.

6

GAO, Troubled Asset Relief Program: Most Community Development Capital Initiative 

Investments Remain Outstanding, GAO-16-626 (Washington, D.C.: July 5, 2016); 

Community Development Capital Initiative: Status of Program Investments and 

Participants, GAO-15-542 (Washington, D.C.: May 5, 2015); and Community 

Development Capital Initiative: Status of Program and Financial Health of Remaining 

Participants, GAO-14-579 (Washington, D.C.: June 6, 2014). 

7

The financial indicators were the (1) net worth ratio––the total of a credit union’s regular 

reserves, any secondary capital, its undivided earnings, and its net income or loss divided 

by its total assets; (2) delinquent loans ratio––the sum of loans 60 days or more past due 

divided by total loans; (3) net charge-offs to average loans ratio––the total dollar amount 

of loans charged off, less amounts recovered on loans previously charged off divided by 

the average dollar value of loans outstanding for the period; (4) return on average assets–

–a credit union’s net income divided by the average of its assets over a specific period, 

such as a quarter or year; and (5) liquidity ratio––liquid assets as a percentage of shortterm liabilities. 

8

12 U.S.C. § 1831t; 12 C.F.R. Part 1009.
Page 33 GAO-17-259 Private Deposit Insurance

site visits at 47 of these 53 (41 site visits to unique credit unions and 6 

site visits to multiple locations of the 41 credit unions). We were unable to 

enter the other six credit unions, usually because they were closed when 

we attempted our visit. The sample was selected to ensure diversity 

across a number of criteria related to possible differences in compliance. 

We selected credit unions for their geographic diversity (credit unions in 

different regions of the country and different states), and to achieve a mix 

of credit unions of different asset sizes, main retail and branch locations, 

and urban and nonurban areas. We also took proximity to GAO offices 

into account as a secondary criterion. Because there may be variation in 

how state regulators and examiners check for compliance with disclosure 

requirements, we conducted site visits in four different states. We 

selected these states to obtain a mix of states in terms of numbers of 

privately insured credit unions––two with many (Ohio and Illinois), one 

with a moderate number (California), and one with few (Maryland)––and 

for geographic diversity. For the geographic distribution (by number and 

percentage) of all the privately insured credit unions across the nine 

states that have them, see table 2.

Table 2: Geographic Distribution of Privately Insured Credit Unions, 2015

State Number Percentage of total Region

Ohio 53 42 Midwest

Illinois 22 18 Midwest

Indiana 15 12 Midwest

California 12 10 West

Idaho 9 7 West

Nevada 7 6 West

Texas 3 2 South

Maryland 2 2 South

Alabama 2 2 South

Total 125

Source: GAO analysis of American Share Insurance data. | GAO-17-259

Note: We conducted site visits in four of the nine states: Ohio, Illinois, California, and Maryland. 

Percentages do not total 100 due to rounding.

We selected privately insured credit unions of varying sizes, as defined by 

total assets, and selected credit unions for site visits that were roughly 

representative of the overall population of credit unions. For instance, 

almost 75 percent of privately insured credit unions had total assets of 
Page 34 GAO-17-259 Private Deposit Insurance

less than $100 million and therefore the majority of credit unions we 

selected for our site visits did as well.

We conducted site visits at both main retail and branch locations. We 

selected locations to include both urban and nonurban areas. We roughly 

defined “urban” as a downtown area where consumers are more likely to 

walk to the credit union and “nonurban” as an area where they are more 

likely to drive. Credit unions in nonurban areas were more likely to have 

drive-through teller windows. Staff conducted site visits between June 

and August 2016. On each visit, staff followed a protocol to help ensure 

consistency and completed a data collection instrument to record their 

observations. The protocol included checking for signs at teller and drivethrough windows and observing sizes and clarity of signs, among other 

items. When possible, we obtained photographic evidence to document 

examples of disclosure signage. Two GAO analysts recorded their 

observations at each site, and any discrepancies were reconciled by 

discussions and photographic evidence where available. We aggregated 

the site visit data and present summary-level information in this report.

To determine compliance with disclosure requirements for the credit

unions’ main Internet page, we reviewed the websites of all 102 privately 

insured credit unions that had a website during the time of our review. 

Analysts followed a protocol to help ensure consistency of observations 

about the clarity, placement, and font size of disclosures observed and 

completed a data collection instrument for each credit union. A second 

analyst independently reviewed each credit union’s website to verify the 

accuracy of information collected by the first analyst. Any discrepancies 

between the two analysts were identified, discussed, and resolved by 

referring to the source websites.

To determine compliance with disclosure requirements for advertising 

(printed materials), we obtained samples of printed materials (such as 

brochures, promotional flyers, and newsletters) from 36 of the 41 unique 

credit unions we visited where such printed materials were readily 

available. We assessed whether these printed materials had proper 

disclosures, taking into account the specified exclusions regarding 

advertising noted in Regulation I. To determine compliance with the 

requirement to (1) provide disclosures in periodic (monthly) statements 

and account records, and (2) get written acknowledgment from depositors 

that the institution does not have federal deposit insurance, we relied on 

testimonial evidence from the nine state credit union supervisors we 

interviewed because we determined that their compliance review in this 

area was adequate for our purposes—for example, each state reviews a 
Page 35 GAO-17-259 Private Deposit Insurance

sample of new accounts as part of the routine examination each credit 

union receives.

Because CFPB is the federal entity responsible for issuing disclosure 

regulations, we interviewed CFPB staff about the agency’s oversight and 

findings related to compliance with these disclosure requirements. We 

compared CFPB’s disclosure requirements for credit unions that do not 

have federal insurance with those of NCUA for federally insured credit 

unions.9 Because privately insured credit unions are state-chartered, we 

interviewed the respective state credit union supervisors in each of the 

nine states about their annual examinations of privately insured credit 

unions, including their review of compliance with requirements to disclose 

a lack of federal insurance. We also interviewed representatives from the 

Credit Union National Association, National Association of State Credit 

Union Supervisors, and the Ohio Credit Union League to ask whether 

they were aware of any issues or concerns related to compliance with 

disclosure requirements for privately insured credit unions.

To determine reasons why credit unions chose private or federal deposit 

insurance and to obtain views on the benefits and risks of each, we 

interviewed representatives from 10 credit unions that had switched to or 

from private insurance in recent years. We identified these credit unions 

by reviewing NCUA’s Insurance Activity Reports (from January 2008 to 

July 2016), which identify deposit insurance conversions, and then 

confirmed these conversions with NCUA and ASI. We interviewed 

representatives from five of the eight credit unions that converted from 

federal insurance provided by NCUA to private deposit insurance 

provided by ASI within the past 5 years.10 Additionally, we interviewed 

representatives from five credit unions that most recently converted from 

private (ASI) to federal (NCUA) deposit insurance. The conversions took 

place in 2008–2009. These selection criteria were chosen because 

representatives from credit unions that recently converted should be able 

to provide reasons why their credit union made the choice to switch from 

federal to private deposit insurance, or vice versa, and have the most upto-date information. We also interviewed representatives from credit union 

trade associations, NCUA, and ASI about the reasons credit unions 

choose private versus federal deposit insurance.

 9

12 C.F.R. Part 740.

10The remaining three credit unions did not respond to our requests for interviews. 
Page 36 GAO-17-259 Private Deposit Insurance

We conducted this performance audit from February 2016 to March 2017 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Page 37 GAO-17-259 Private Deposit Insurance

Credit unions in the United States can be federally or state-chartered, 

which determines their primary regulator for safety and soundness and 

also their options for deposit insurance. Federally chartered credit unions 

are regulated by the National Credit Union Administration (NCUA) and 

must be federally insured by NCUA’s National Credit Union Share 

Insurance Fund, which provides up to $250,000 of insurance per 

depositor for each account ownership type. State-chartered credit unions 

are regulated by credit union supervisors in their respective state and also 

can be federally insured by NCUA or, in some states, choose a private 

insurer.1 American Share Insurance (ASI) is the sole insurer for private 

deposit insurance to credit unions and provides coverage up to $250,000 

per account. Credit unions sometimes change deposit insurers—for 

example, converting between federal and private deposit insurance. 

According to information provided by NCUA, eight credit unions converted 

from federal to private deposit insurance in 2012–2016, and five 

converted from private to federal deposit insurance in 2008–2009 (the 

most recent such conversions).

Representatives of some credit unions that converted from federal to 

private deposit insurance cited the following reasons:

• Greater coverage for members. ASI insures $250,000 per account, 

whereas NCUA insures $250,000 per depositer for each account 

ownership type. Thus, ASI provides more coverage for members with 

more than $250,000 in a particular deposit type because they can 

structure their deposits into multiple accounts of $250,000 or less.

• Reduced federal oversight. Representatives of some statechartered credit unions described state regulation and oversight, 

including the examination process, as less burdensome than federal 

regulation and oversight.

• Cost savings. Credit union representatives said that private deposit 

insurance was less expensive than federal deposit insurance following 

the 2007-2009 financial crisis because ASI’s special premium 

 1

By law, federally chartered credit unions must have deposit insurance provided by 

NCUA. In most states, state law requires state-chartered credit unions to also have federal 

deposit insurance, according to the National Association of State Credit Union Supervisors 

(NASCUS). NASCUS also told us that in some states, state law permits credit unions to 

have private deposit insurance, although in some of these states no credit unions have 

chosen to do so. There are nine states where private deposit insurance is permitted and at 

least some credit unions have chosen to use it: Alabama, California, Maryland, Idaho, 

Illinois, Indiana, Ohio, Nevada, and Texas.

Appendix II: Reasons Credit Unions Chose 

Private or Federal Deposit Insurance
Page 38 GAO-17-259 Private Deposit Insurance

assessments were lower than the premiums of the National Credit 

Union Share Insurance Fund, and state regulatory fees are less than 

those of NCUA.2

• Comparable business models. A credit union representative noted 

that the credit union business model aligns well with ASI—both are 

not-for-profit organizations that exist to serve their members, and 

member credit unions sit on ASI’s board of directors.

Representatives of some credit unions that converted from private to 

federal deposit insurance cited the following reasons:

• Full faith and credit of U.S. government. Deposits are backed by 

the full faith and credit of the U.S. government, which provides 

depositors with greater confidence and security.

• Concern about private insurer during financial crisis. A 

representative of one credit union told us the main reason it switched 

to NCUA insurance was because it was concerned that ASI might not 

survive the 2007–2009 financial crisis.

• Access to additional funding source. One credit union 

representative told us the credit union switched to federal deposit 

insurance in 2008 to allow it to join a Federal Home Loan Bank, which 

provided it with access to an additional funding source.

3

 2

We did not request premium data from the credit unions to verify these statements about 

cost savings. NCUA staff told us they do not agree that private deposit insurance is less 

expensive than federal deposit insurance. 

3

Privately insured credit unions not certified as community development financial 

institutions were not allowed to become members of the Federal Home Loan Bank System 

until the enactment of the Fixing America’s Surface Transportation Act in December 2015.

Pub. L. No. 114-94, § 82001, 129 Stat. 1312, 1795 (2015). 
Page 39 GAO-17-259 Private Deposit Insurance

Appendix III: Comments from the Consumer 

Financial Protection Bureau
Page 40 GAO-17-259 Private Deposit Insurance
Page 41 GAO-17-259 Private Deposit Insurance

Alicia Puente Cackley, (202) 512-8678 or cackleya@gao.gov

In addition to the contact name above, Jason Bromberg (Assistant 

Director), Beth Faraguna (Analyst in Charge), Caitlin Cusati, Paul 

Foderaro, Alice Hur, Risto Laboski, Yola Lewis, Ned Malone, Scott 

McNulty, Marc Molino, Barbara Roesmann, Jessica Sandler, Frank 

Todisco, and Shana Wallace made key contributions to the report.

Appendix IV: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(100682)
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