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NCUA to CUs Assessment decision was not taken lightly
ALEXANDRIA, Va. (6/22/10)--The National Credit Union Administration (NCUA) on Monday communicated directly with credit unions, telling them that the recent decision to repay corporate credit union stabilization costs by assessing a 13 basis point per insured share fee on natural person credit unions “was not taken lightly.” The NCUA is currently required to repay the U.S. Treasury a total of $1.5 billion for funds that were borrowed to prop up the corporate credit union system. The assessment, which will be invoiced in July or August and will come due in mid-August, will cover $1 billion of that total, with the NCUA covering the remaining $500 million by reducing “the liquidity assistance provided to corporate credit unions in September.” The letter to credit unions provides that federally insured credit unions should calculate the assessment based on insured shares and deposits as of March 31. Credit unions can record the expense on the line National Credit Union Share Insurance Fund stabilization expense (account code 311) on the June call report. While several credit union officials have asked the NCUA if it could “ease the burden of assessments” for credit unions that have prudently managed their risks, the NCUA’s letter to credit unions said that the Federal Credit Union Act requires the regulator to share the burden of any premium or assessment among all in the credit union system. The NCUA letter also covered some of the decisions looming on the horizon, including decisions that natural person credit unions will have to make regarding whether or not corporate credit unions should be recapitalized, if they should switch to another corporate credit union, or if they should seek out a non-CU source for the services that the corporates once provided. The NCUA said that it “plans to do its part to resolve the issues within the corporate credit union system,” adding that it will soon “propose a plan to remove the toxic assets that have depleted capital from investors in corporate credit unions” and will also “finalize a new corporate credit union regulation that will prevent the concentration of high-risk assets and build a stronger buffer to protect capital.” That asset plan “will ensure that new corporates begin with clean balance sheets,” and will ensure that those clean balance sheets are maintained, the agency added. For the full NCUA letter, use the resource link.
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