ALEXANDRIA, Va. (UPDATED: 2:45 P.M. ET, 11/15/11)—The National Credit Union Administration (NCUA) will bring in $165.5 million in funds to help cover corporate credit union stabilization costs after Citigroup and Deutsche Bank Securities elected to settle with the agency, the NCUA announced today.
Both Citigroup and Deutsche Bank Securities agreed to pay the NCUA to avoid potential litigation regarding potential claims relating to the sale of residential mortgage-backed securities to five failed wholesale credit unions. Neither Citigroup nor Deutsche Bank Securities admitted any fault in the settlements.
Deutsche Bank will pay the agency $145 million, and Citigroup will pay $20.5 million, under the terms of the separate settlements.
NCUA Chairman Debbie Matz said the settlements further the NCUA's goal "to minimize losses and thereby reduce the assessments that all credit unions will have to pay," and added that the agency is fulfilling its statutory responsibility "to secure maximum recoveries for credit unions and ensure that consumers remain protected."
Citigroup and Deutsche Bank Securities are among the first major underwriters to come forward with settlement proposals, and Matz said the agency appreciates their efforts to resolve potential claims and avoid the expense and delay of litigation.
The NCUA is also attempting to reclaim billions in securities-related corporate credit union losses from other Wall Street firms, and has requested nearly $2 billion in combined damages from Goldman Sachs, RBS Securities and J.P. Morgan. The agency has brought four lawsuits and said earlier this year that it expects to take an additional five to 10 actions. Credit Union National Association (CUNA) General Counsel Eric Richard said that these Wall Street firms have the potential to provide significant reimbursement of the credit union system's losses, but reclaiming these losses may be a long, difficult process for the NCUA.