Assessments Less Onerous for CUs Than Banks

CUs likely will pay about one-third less than banks over the next 11 years.

November 30, 2010
KEYWORDS fdic , funds , ncua , stabilization
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Recent NCUA actions

Over the past several months, NCUA took the following actions pertaining to the NCUSIF and the Corporate Stabilization Fund:

  • In June, assessed a 2010 Corporate Stabilization Fund assessment of 13.4 bp;
  • In September, assessed a 2010 NCUSIF premium of 12.42 bp, bringing the fund’s equity ratio to its normal operating level of 1.3% of insured shares.

The combined assessments for the year are therefore 25.82 bp of insured shares.

In September, NCUA conserved three corporate credit unions (in addition to the two conserved last year) and announced a plan to deal with the “legacy assets” of the five conserved corporates with the following implications:

• Roughly $50 billion of legacy assets will be funded by $35 billion of guaranteed notes, with final maturities ranging to 2021.

• This funding is based on expected ultimate credit losses of around $15 billion on the $50 billion of legacy assets.

Of the $15 billion of estimated losses, $6.9 billion has already been paid ($5.6 billion from extinguished capital at the five conserved corporates and $1.3 billion paid by credit unions in previous assessments this year and last year). That leaves $8.1 billion yet to be paid by credit unions (to be assessed by NCUA) over the remaining term of the Corporate Stabilization Fund.

Because the notes funding the legacy assets will have maturities to 2021, the remaining term of the Corporate Stabilization Fund was extended from five to 11 years.

• In November, announced estimated ranges for 2011 assessments of 0 bp to 10 bp for the NCUSIF premium, and 20 bp to 25 bp for the Corporate Stabilization assessment.

Next: Recent FDIC actions

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