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NCUA issues guidance on PIC MCA updates corporate status
ALEXANDRIA, Va. (5/26/09)—The National Credit Union Administration on Friday issued guidance on matters relating to paid-in capital (PIC) and membership capital (MCA). According to the guidance, corporate credit unions have no obligation to restore exhausted PIC or MCA, regardless of whether or not the PIC or MCA is classified as a liability or equity under generally accepted accounting principles, even if the retained earnings “substantially improve.” NCUA also advised that it is “impermissible” to pay dividends to the holders of outstanding PIC and MCA based on the balance of depleted PIC or MCA. NCUA also said that credit union directors and management must judge for themselves whether their PIC and MCA are impaired and whether that possible impairment is “other-than-temporary.” Full text of the guidance can be found at NCUA’s web site, www.ncua.gov. In its most recent update on the status of the corporates, NCUA said that reviews of all private label mortgage backed securities held by U.S. Central FCU and Western Corporate FCU (WesCorp) have been completed. The results of these reviews should be released to their members soon. U.S. Central’s other-than-temporary impairment charges have been determined, and retail corporate credit unions will be required to write down 100% of their PIC investments and 23% of MCA investments as a result. Only one retail corporate credit union should have negative retained earnings as a result of its investments at U.S. Capital, NCUA added. The board also predicted that recent actions aimed at enhancing the Temporary Corporate Credit Union Share Guarantee Program and the Temporary Corporate Credit Union Liquidity Guarantee Program should help corporates maintain their liquidity “going forward.”


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