ALEXANDRIA, Va. (11/7/12)--The Nov. 2 payment of a $1.5 billion obligation of now-defunct Western Corporate FCU (WesCorp) is a major step forward in the National Credit Union Administration's (NCUA) work to resolve corporate credit union issues, the agency said.
The $1.5 billion WesCorp Medium Term Note obligation was one cost incurred when the NCUA acted to stabilize the corporate credit union system. Last week's $1.5 billion payment was made with the proceeds of credit union assessments, cash on deposit and other assets from the failed corporate credit unions, the NCUA said.
The WesCorp repayment is "an important milestone in NCUA's efforts to resolve the failure of five corporate credit unions in an orderly manner and maintain confidence in the credit union system," NCUA Chairman Debbie Matz said in an agency release. "With this final payment completed, we will continue our efforts to mitigate costs to federally insured credit unions over the remaining life of the [Temporary Corporate Credit Union Stabilization Fund (TCCUSF)]," she added.
The agency also paid off a $2 billion medium term note obligation of another failed corporate, U.S. Central FCU, last month. Members United Corporate FCU, Constitution Corporate FCU and Southwest Corporate FCU were liquidated by the NCUA in the fall of 2010, and costs related to these failed corporates were also paid by the TCCUSF.
A total of $5.1 billion in outstanding borrowings from the U.S. Treasury still need to be repaid by the TCCUSF, the NCUA release added. The agency noted that this outstanding balance may be repaid over the remaining life of the stabilization fund, which expires in June 2021. The NCUA said it will determine future assessments to repay this balance.
The NCUA last week reduced the projected cost of corporate credit union stabilization assessments to between $6 billion and $8.9 billion, a $400 million reduction from the previous maximum cost of $9.3 billion.
Credit unions have already paid $4.1 billion in TCCUSF assessments, including a 2012 TCCUSF assessment of 9.5 basis points (bp) of their insured shares as of June 30. With the new estimates, they will need to pay between $1.9 billion and $4.8 billion in additional assessments before the stabilization fund expires in 2021.
Credit Union National Association (CUNA) Chief Economist Bill Hampel said the 2013 TCCUSF assessment is likely to be in the range of 5 bp to 10 bp. A 2013 TCCUSF assessment of no more than 5 bp "would be sufficient to responsibly make headway on paying down the fund, pending further information on what the ultimate losses will actually be," he said. (See Nov. 2 News Now story: NCUA reduces TCCUSF high estimate by $400M)
The NCUA plans to release its own estimate of the 2013 assessment this month.
For the full NCUA release, use the resource link.