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Citigroup Deutsche Bank settle with NCUA on corporate losses
ALEXANDRIA, Va. (11/15/11)—The National Credit Union Administration (NCUA) will bring in $165.5 million in funds to help cover corporate credit union stabilization costs after Citigroup and Deutsche Bank Securities elected to settle with the agency, the NCUA announced on Monday. After legal and other costs are deducted, this will represent more than $100 million in net funds that will be applied to the 2012 stabilization fund assessment, which is roughly a 1 basis point reduction from what it would be otherwise. The agency is also seeking to recover $2 billion total from the Royal Bank of Scotland, RBS Securities, JP Morgan Securities, and Goldman Sachs in suits it has filed against these entities. There may be additional recoveries from other firms that sold residential mortgage-backed securities to corporate credit unions that contributed to their losses.

"I applaud the agency's efforts to pursue recoveries from these firms," CUNA's President and CEO Bill Cheney said this afternoon. "NCUA has appropriately taken a leading role in pursuing these entities and the agency's efforts will help reduce the corporate credit union stabilization costs that credit unions would have otherwise had to pay." "The actions announced by the agency were the result of out-of-court settlements," CUNA"s General Counsel Eric Richard explained. "Settlements of this type always involve judgment calls about the uncertainty of how litigation will turn out versus compromising the full extent of the claim. While the settlement did not result in admission of guilt from the banks, it has resulted in recoveries that will help contain credit union costs," he added.

Both Citigroup and Deutsche Bank Securities agreed to pay the NCUA to avoid litigation regarding potential claims relating to the sale of residential mortgage-backed securities to five failed wholesale credit unions. Neither Citigroup nor Deutsche Bank Securities admitted any fault in the settlements.

Deutsche Bank will pay the agency $145 million, and Citigroup will pay $20.5 million, under the terms of the separate settlements.

NCUA Chairman Debbie Matz said the settlements further the NCUA's goal "to minimize losses and thereby reduce the assessments that all credit unions will have to pay," and added that the agency is fulfilling its statutory responsibility "to secure maximum recoveries for credit unions and ensure that consumers remain protected."

Citigroup and Deutsche Bank Securities are among the first major underwriters to come forward with settlement proposals, and Matz said the agency appreciates their efforts to resolve potential claims and avoid the expense and delay of litigation.

The agency has brought four lawsuits and said earlier this year that it expects to take an additional five to 10 actions.
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