ALEXANDRIA, Va. (12/14/07)--A dividend from the National Credit Union Share Insurance Fund (NCUSIF) to federally insured credit unions for 2007 is unlikely, said National Credit Union Administration (NCUA) staff during yesterday’s monthly board meeting. Meanwhile, the board voted unanimously to maintain the 2008 NCUSIF normal operating level at 1.3% and approved a policy to determine and monitor future levels. The operating level is the upper end of the target range for the NCUSIF's equity ratio, which represents the amount of insured shares in relation to the amount in the NCUSIF. A dividend must be distributed to federally insured credit unions when the equity in the fund exceeds the normal operating level at the end of a year. Data showed the fund's equity ratio dropped to 1.27% in June, after remaining at 1.31% for the first quarter and 1.32% for April and May. The agency projected two more months at 1.27% before that ratio might return to 1.31% and better during the September though December period of this year. However, NCUSIF dividends to credit unions are determined on year-end calculations, and NCUA CFO Dennis Winans said it seemed unlikely a dividend will be paid for 2007. During the same meeting, the board unanimously approved changes in how it sets the NCUSIF normal operating level, as well as determines dividends and premium assessments. The purpose of the change is to provide greater transparency in the process, according to the agency. To determine adequacy of the equity level, the policy includes stress scenarios to apply when preparing quantitative analysis to set the normal operating level. Stress scenario applications include:
* Highest share level in past 10 years; * Highest NCUSIF operating expense level in past 10 years; * Highest insurance loss level in the past 10 years; and * 300 basis point shock of the investment yield in the NCUSIF investment portfolio.
Stress test results will “determine a range in which the equity level can be actively managed to avoid premiums during a decline in the business cycle,” said the agency. The NCUA Board traditionally set the NCUSIF normal operating level at the end of each calendar year. NCUA said the new policy will continue to review the operating level at least annually, taking action when change is necessary. CUNA Associate General Counsel Mary Dunn said the agency's goal to provide more transparency is laudable, but said credit unions should have had the opportunity to comment on the policy before it was adopted. She said CUNA will analyze the policy in greater detail and raise any concerns with NCUA.