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NCUA reiterates corporates strength after iWSJi story
ALEXANDRIA, Va. (8/12/08)--Following a story in yesterday’s Wall Street Journal, the National Credit Union Administration (NCUA) said it would continue prudent regulatory oversight and close supervision of the corporate credit union system, which the agency said maintains a “strong” liquidity position. NCUA’s statement was in response to Monday’s front page Wall Street Journal story entitled “Mortgage-Market Trouble Reaches Big Credit Unions.” (Use the link below to access the complete story online.) That story primarily addressed the impact of current market conditions on fair values of mortgage-related securities held by five corporate credit unions. The article notes as of May 31, five corporate credit unions have reported $5.7 billion in accumulated unrealized losses on available-for-sale securities. Additionally, the article discusses the reclassification of some securities from available-for-sale to held-to-maturity on the balance sheets of U.S. Central FCU (U.S. Central) and Western Corporate FCU (WesCorp). In a statement, NCUA said its Office of Corporate Credit Unions (OCCU) “continues to dedicate its resources to ensuring corporate credit unions are managing their balance sheets appropriately during this stressed market affecting mortgage-related securities. OCCU will not change its regulatory strategy as a result of this article.” NCUA said corporate credit unions, by regulation, are limited to the most highly credit rated investments, and that the vast majority of mortgage-related securities held by corporate credit unions “continue to be highly rated and continue to perform as expected.” “However, the lack of liquidity in the mortgage-related securities market has resulted in many financial institutions, including corporates, having to record accumulated unrealized losses on available-for-sale securities,” said NCUA. “These adjustments have been made in accordance with generally accepted accounting principles (GAAP) as set forth in Financial Accounting Standards Board (FASB) Statement of Financial Accounting (SFAS) No. 157 Fair Value Measures.” The agency also reiterated that corporate credit unions’ liquidity position is “strong.” “Corporate credit unions have ample liquidity to meet foreseeable liquidity demands,” said NCUA. “Furthermore, they have established additional liquidity sources in the event of increased liquidity demands from their members.” As part of its ongoing supervision, NCUA said OCCU monitors the liquidity position of the largest corporate credit unions “daily.” NCUA said U.S. Central and WesCorp have demonstrated they have “the ability and intent to hold securities transferred to maturity.” “As such, this reclassification of securities complies with GAAP. In addition, the securities reclassification was reviewed by their auditors and OCCU,” said NCUA.
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