ALEXANDRIA, Va. (10/17/08)--The National Credit Union Administration (NCUA) Thursday announced a corporate credit union liquidity guarantee program that will operate from Oct. 16, 2008, through June 30, 2009. The program is similar to the “Temporary Liquidity Guarantee Program” announced by the Federal Deposit Insurance Corporation Oct. 14, 2008, and is intended to provide corporate credit unions with competitive standing in the debt market. The National Credit Union Share Insurance Fund (NCUSIF) is providing federally insured corporate credit unions with a 100% guarantee on new unsecured debt obligations. The guarantee is subject to terms detailed in the program. To qualify, new unsecured debt obligations must be issued by eligible corporate credit unions on or before June 30, 2009, and mature on or before June 30, 2012. Included promissory notes, commercial paper, inter-bank funding, and any unsecured portion of secured debt, the agency announcement said. The NCUA provided the following details: The amount of debt obligations covered by the guarantee per eligible corporate credit union may not exceed the greater of:
* 100% of the eligible corporate credit union’s maximum unsecured debt obligations outstanding during the period Sept. 30, 2007 through Sept. 30, 2008; * An amount determined by written approval of the agency’s director of the Office of Corporate Credit Unions, with the prior concurrence of its director of the Office of Examination and Insurance, not to exceed $100 million; or * An amount determined by the NCUA Board.
All corporate credit unions are automatically covered for debt obligations issued through Nov. 17, 2008. Corporate credit unions may elect to opt out of the program by providing notice to the NCUA Office of Corporate Credit Unions. The NCUSIF will charge participating corporate credit unions a fee of 75 basis points per year on the outstanding balance of guaranteed debt obligations. "While this new Board action is directed at addressing corporate liquidity issues, I think it is important that natural person credit unions be fully aware of all of their options in this very tight and difficult liquidity situation, including the Central Liquidity Facility (CLF),” said NCUA Chairman Michael Fryzel when announcing the guaranty program. “The standards for CLF borrowing are stringent, and our evaluation of requests will be thorough, but credit unions should know that their short-term liquidity needs can be addressed through CLF borrowings. I encourage all appropriate use of the CLF as another means to maintain liquidity and confidence in the credit union system during these uncertain times." Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn said both CUNA and the Association of Corporate Credit Unions had urged agency action. “We commend them for taking this step,” she said.