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Corp. assessment set at 25 bp 2012 NCUSIF premium unlikely
ALEXANDRIA, Va. (8/30/11)— Credit Union National Association (CUNA) President/CEO Bill Cheney said that the National Credit Union Administration’s (NCUA) 25 basis point (bp) Temporary Corporate Credit Union Stabilization Fund (TCCUSF) assessment “came as no surprise” to credit unions, but nonetheless “represents a substantial hit” to their otherwise improving bottom lines. However, the news was not all bad for credit unions on Monday, as the agency also said that there is “no anticipated need” for a National Credit Union Share Insurance Fund (NCUSIF) premium to be charged in 2011, and an NCUSIF premium “will not be necessary in 2012” if the number of credit union failures maintains its current pace. NCUA board members during the NCUA’s August meeting approved a 2011 TCCUSF assessment of 25 bp of member shares as of the end of June, which would bring in $1.96 billion in funds to help cover the costs of corporate credit union stabilization. The 2011 TCCUSF assessment payment is due Sept. 27, and the NCUA said that credit unions should expense the assessment in September and report the full expense on their Sept. 30 call reports. Revenues from the 2011 TCCUSF assessment, along with money that the agency borrowed from the U.S. Treasury, will be used to pay off maturing medium-term notes principal and interest, the NCUA said. As a result of the TCCUSF assessment, about 800 credit unions will go from reporting positive net income to having net negative income. The net worth of 81 credit unions will fall below 7%, and 24 credit unions may have to prepare a prompt corrective action net worth restoration plan as a result of the assessment. However, on average, the net worth ratio of federally insured credit unions will drop only from 10.14% to 9.99%, the NCUA said. NCUA Chairman Debbie Matz said that the agency is mindful of the burden that these assessments place on credit unions, and NCUA staff said that while some credit unions would be negatively impacted, the NCUA felt it better to impose this size of assessment in 2011 when most credit unions are in a position to absorb the hit. The NCUA board emphasized that examiners will be directed to be flexible in determining the real safety and soundness impact of this corporate assessment on individual credit unions. NCUSIF and TCCUSF assessments for 2012 would likely total between 8 and 18 bp, the NCUA said. NCUA staff estimated that the 2012 TCCUSF assessment would need to collect $700 million, and anticipated an assessment of around 9 bp. NCUA analysts forecast that a 2012 NCSUIF assessment, if needed, would be a maximum of 7 bp, bringing in $607 million in NCUSIF funding. NCUA staff stressed that this projection is based on its most pessimistic estimate of NCUSIF losses. The total cost of remaining assessments has been reduced to between $1.9 billion and $6.2 billion after asset management firm BlackRock examined the financial status of the corporate stabilization fund, legacy assets held by the NCUA, and other data. The previous NCUA estimate for total corporate resolution assessments charged after 2011 was between $5 billion and $7.2 billion. BlackRock will also produce quarterly models detailing losses and cash flows of securitized assets held in NCUA Guaranteed Notes, and the agency said that these quarterly models would soon be reported on the NCUA’s homepage. For more on the NCUA board meeting, use the resource link.
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