ALEXANDRIA, Va. – The NCUA Board will begin efforts Thursday to plug a loophole in the agency’s regulations that could allow credit unions to avoid paying their share of the $6 billion corporate bailout by converting to private deposit insurance.
Credit unions apparently have until NCUA charges the $1 billion first instalment of the corporate bailout later this year to convert to private insurance to escape the charges. A conversion would also enable the credit union to avoid paying a share of an additional $1 billion premium that will be assessed by the National CU Share Insurance Fund in the third quarter, which will only be paid by federally insured credit unions.
Several credit union executives said they have reviewed the cost savings and other ramifications of converting from federal insurance.
The NCUA Board is considering new rules on how to apply a share of the federal deposit charges to those state charters and when the cut-off for converting to private coverage is.
Only state charters may be privately insured, meaning a federal credit union could convert simultaneously to state charter and private insurance.
