Matz: NCUSIF Could Go Slightly Below 1.2% Level

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CHICAGO — The NCUA Board would consider allowing the National Credit Union Share Insurance Fund (NCUSIF) to operate with an equity ratio slightly below 1.2%, but will not consider allowing that ratio to drop anywhere near the 1.1% range or even lower as some have proposed, according to NCUA Chairman Debbie Matz.

NCUA had budgeted for the fund to operate closer to 1.3% in 2010, but ongoing losses-$132 million to date-have forced additional funds be placed into reserves, and the fund currently has an equity ratio of approximately 1.22%. The NCUSIF is required by law to operate with a 1% minimum equity ratio, but once it drops below 1.2% NCUA is required to provide Congress with a net worth restoration plan.

"NCUA is focused on careful management of the share insurance fund's equity ratio," Matz said. "While our equity ratio remains within its normal operating range between 1.2 and 1.3%, it has declined since beginning of the year. Some have called for it to operate a few basis points below the 1.2%, and this is one option for the NCUA board to consider to ease the assessments."

But going any lower is not feasible, said Matz. "Given the magnitude of losses, I believe it is not practical to manage the ratio to just a few basis points above the 1.0%." Matz noted there are currently 2,100 credit unions operating as either CAMEL 3, 4 or 5, representing 21% of all federally insured assets.

Previously, NAFCU CEO Fred Becker had reiterated his group's position that the board OK the fund operating below the 1.2% threshold.

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