ALEXANDRIA, Va.-NAFCU called on NCUA last week to use more of the National CU Share Insurance Fund's reserves before assessing federally insured credit unions more charges for the corporate credit union bailout and other credit union failures next year.
In a letter to NCUA Chairman Deborah Matz, NAFCU President Fred Becker acknowledged the growing costs of credit union problems and asked that NCUA dig deeper into the reserves for the National CU Share Insurance Fund to pay for some of the charges before collecting additional assessments from credit unions.
NCUA officials last week said growing losses in both corporate and natural person credit unions could force the agency to charge additional assessments of as much as $3 billion next year. That comes on top of $1.1 billion in special charges assessed this year.
NAFCU's Becker reminded Matz that, though the NCUA Board prefers to maintain a reserve level of 1.3 (dollars reserved per $100 of insured deposits) for the NCUSIF, it can legally maintain a lower reserve.
In addition, under recently passed legislation, NCUA can also spread a rebuilding of reserves out for as long as eight years. That legislation, noted Becker, would allow the reserves for the NCUSIF to fall as low as 1% before NCUA would be required to replenish it.
Becker's plea came after NCUA delivered some sobering news the week before on projected losses, after the NCUA Board approved a 13% increase in spending to pay for as many as 60 new examiners next year. NCUA projected losses for the NCUSIF of between $450 million and $1.7 billion for next year, which would require a premium of as much as 25 basis points to replenish reserves. It also projected a premium of as much as 15 bps for the newly created Corporate CU Stabilization Fund. The combination could require NCUA to charge a premium of as much as $3 billion next year to rebuild reserves for the insurance fund to the desired 1.3 level.
"While the stresses to the insurance fund are real and require delicate management on the part of the regulator, NAFCU believes that the NCUA should consider using its discretion relative to the normal (reserve level) to further minimize assessments to credit unions," wrote Becker. "The current state of our industry and the financial condition of a large number of federally insured credit unions demand that the NCUA Board use every tool it has available to minimize the financial burden on credit unions in 2010."
