Agency Reviewing CU Appetite For Pre-Paying Corp Assessments

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WASHINGTON-NCUA Deputy Director Larry Fazio said last week that the agency is continuing to review credit union interest in its proposal to allow credit unions to prepay some of their corporate credit union stabilization fund assessments, and added that whether a credit union chooses to participate or not will not be an issue during examinations.

Fazio's comments were made during an audio conference hosted by CUNA, during with CEO Bill Cheney, Chief Economist Bill Hampel and Deputy General Counsel Mary Dunn also participated.

During the call, Fazio said that the prepayment plan, which would allow most credit unions to voluntarily prepay up to 36 BPs of their corporate stabilization assessments, was specifically created in response to strong interest from credit unions, including from CUNA.

The response from credit unions, Fazio said, is divided between those that want to pay the stabilization costs as early as possible, and those that wish to spread out payments.

While Fazio did not mention this on the call, there are also opponents to the plan, such as First Entertainment Credit Union President and CEO Chuck Bruen, whose comment letter on the matter appeared in the June 13 Credit Union Journal.

Careful not to alienate those credit unions who might oppose the program, CUNA's representatives on the call said that it is up to individual credit unions to analyze their own financial plans and decide if they wish to participate.

To participate, a credit union would need to advance the minimum amount of $10,000, with the agency saying it will not move forward with the plan if credit unions do not collectively commit at least a total of $300 million in funds to the corporate credit union assessment pre-pay proposal.

According to NCUA, the prepayment plan would generate $2.8 billion in funds should all eligible credit unions contributed the maximum amount. NCUA recently indicated that approximately 6,023 credit unions would be able to take part in the plan.

Fazio said that should the prepayment plan not move forward, the regular assessment of approximately 25 BPS will be assessed in July.

Fazio added that with sufficient participation in the voluntary plan, the 2011 and 2012 assessments would be in the low teens, followed by assessments of 10 BPs in 2013 and less in the following years until the Corporate Credit Union Stabilization Fund is retired.

CUNA reported that the NCUA would process a direct debit to a credit union's account in August for the prepayment, if the agency's plan is approved. Then, all credit unions' regular assessment for this year would be due in August if the prepaid assessment proposal is adopted, CUNA said.

NCUA said that the prepayment plan will not have a material affect on the total amount of assessments to be paid over the life of the stabilization fund.

Instead, the goal, the agency said, is to avoid the front loading of much of the assessment expenses and to even out assessments for subsequent years of the life of the Corporate Credit Union Stabilization Fund.

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Corporate credit unions