ALEXANDRIA, Va. – A consultant’s report commissioned by NCUA recommends that the natural person credit unions be used to recapitalize the failing corporate credit union system.
Among the recommendations made by PricewaterhouseCoopers LLP that NCUA collaborate with natural person credit unions to increase liquidity at the corporates by, among other things, making corporate membership contingent on providing paid-in-capital and inducing large, well-capitalized credit unions to provide capital on a voluntary basis.
NCUA, which has been shopping the ideas around in meetings with credit union representatives for the past month, has already enacted some of the consultant’s recommendations in an effort to stem the unrealized losses in the corporate system, which have grown to an estimated $20 billion.
Among the recommendations already enacted are a guarantee of all corporate deposits to help stop a run on the corporates and use of the Central Liquidity Facility to infuse liquidity into the system.
The PricewaterhouseCoopers report is one of several being studied by NCUA as it struggles to save the corporate system.
Among the other recommendations:
* create a pool of lower rated securities held by the corporates;* use CLF loans as a source of paid-in-capital or other form of capital for the corporates;
* more closely regulate core and non-core corporate activities.
NCUA hired PwC in November to review proposals for restructuring the corporate system and was in the process of reviewing the proposals when U.S. Central announced a massive $1.1 billion loss for 2008, necessitating an emergency enactment of some of the recommendations, like the guarantee of corporate deposits.
A subsequent consultant’s review of all the corporates’ investments, being conducted by PIMCO, is expected to be completed as soon as this week.
