NCUA Approves Special Assessment for Credit Unions

Premiums Will Help Bolster Insurance Fund The National Credit Union Administration (NCUA) board has voted to begin repaying through a special assessment the $310 million it borrowed from the Treasury department for corporate credit union stabilization.

This assessment upon credit unions will help keep the National Credit Union Share Insurance Fund (NCUSIF) strong, the board says. The repayment will entail premiums of 15 basis points of a credit union's insured shares. Credit unions will be expected to pay up by year's end. This will help shore up the corporate credit union issues exacerbated by the failure of two corporate credit unions earlier this year.

"The Board is aware that assessments, especially during an adverse business cycle, are not desirable," says NCUA Chair Debbie Matz. "In making the decision, the board's objective was to balance the need to minimize the current additional pressure on earnings against the long-term health of the NCUSIF and the future earnings burden on credit unions by not acting now."

She goes on to say the decision made by the board will strengthen the NCUSIF "while also preventing credit unions from having to record much higher assessments in future periods." The NCUA is reminding examiners to factor out the adverse impact of the premium when evaluating and rating credit union earnings performance.

Matz says the board considered "many factors in the decision making process, including the current economic climate, current condition of the credit union system, and the results from stress testing the NCUSIF."

In the stress testing process, staff prepared several scenarios of financial and economic adversity to assess the adequacy of the NCUSIF. Though the testing shows the NCUSIF covering a very large portion of the scenarios, all test results point to a higher level of projected stress on the NCUSIF over the next couple of years.

The NCUSIF premium currently is 0.1027 percent of federally insured shares. Since the start of the recession beginning in December 2007, the board has stated it wanted to maintain the NCUSIF at the normal operating level of 1.30 percent.

Matz says updated analysis of the NCUSIF's risk levels point to a higher number of potential credit union failures in the next 15 months. Higher losses for the NCUSIF through 2010 will come from the continued severe problems in the housing sector. "Maintaining the NCUSIF at 1.30 percent will promote confidence in the NCUSIF and give NCUA maximum flexibility to address troubled institutions," she says.

About the Author

Linda McGlasson

Linda McGlasson

Managing Editor

Linda McGlasson is a seasoned writer and editor with 20 years of experience in writing for corporations, business publications and newspapers. She has worked in the Financial Services industry for more than 12 years. Most recently Linda headed information security awareness and training and the Computer Incident Response Team for Securities Industry Automation Corporation (SIAC), a subsidiary of the NYSE Group (NYX). As part of her role she developed infosec policy, developed new awareness testing and led the company's incident response team. In the last two years she's been involved with the Financial Services Information Sharing Analysis Center (FS-ISAC), editing its quarterly member newsletter and identifying speakers for member meetings.

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