NCUA approves $160M payout but trades want more

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Credit unions are set for another payout from the National Credit Union Administration following the board’s approval of a $160.1 million equity distribution from the National Credit Union Share Insurance Fund.

The distribution, expected to be delivered sometime during the second quarter, is the result of the share insurance fund’s equity ratio hitting 1.39 percent, above the 1.38 percent normal operating level approved by the board last year. Reducing the equity ratio to an approved normal operating level requires a $160.1 million distribution.

“This action, along with others taken by the NCUA board, including closing the [Temporary Corporate Credit Union] Stabilization Fund in 2017, kept $1.3 billion at work in credit unions by negating the need for insurance fund premiums and put nearly $900 million back to work in credit unions and their communities with the last two Share Insurance Fund distributions,” NCUA Chairman Mark McWatters said in a press release.

The NCUA board indicated during its December 2018 meeting that a refund might be coming.

This is believed to be the second-largest distribution in the history of the Share Insurance Fund. Last year’s approved distribution was $736 million following the merger of the share insurance fund and the stabilization fund.

Credit unions that utilized federal deposit insurance and filed call reports with the agency during at least one quarter of 2018 are eligible for a pro rata distribution. Eligibility criteria for how a credit union can receive an equity distribution is detailed within a final rule that the regulatory body’s Board approved in February 2018.

“I am pleased that NCUA’s successful management of the [NCUA Guaranteed Noes] program and its successful lawsuits against the firms that sold toxic assets to corporate credit unions have made it possible for us to return funds to credit unions two years in a row,” board Member Rick Metsger said in a statement.

Credit union trade organizations offered mixed reactions.

“We commend NCUA for its prudent stewardship of credit union funds and for recognizing that this money could be best put to use serving credit union members around the country,” Credit Union National Association President and CEO Jim Nussle said in a statement.

But the National Association of Federally-Insured Credit Unions wanted to see more.

"NAFCU thanks the NCUA for reviewing and lowering the NCUSIF's normal operating level, so that credit unions can receive a refund this year,” NAFCU President and CEO Dan Berger said. “However, we continue to believe that it should be reset to 1.3 percent so credit unions can realize the fullest distribution possible.”

“We are pleased that the NCUA Board approved today’s distribution and applaud the board for recognizing that the $160.1 million will be better utilized in credit unions," said Lucy Ito, president and CEO of the National Association of State Credit Union Supervisors, which has long been a proponent of changing the NOL. The reduction of the normal operating budget shows that NCUA is monitoring systemic risk and adjusting the normal operating level as they committed to do when they raised the equity ratio of the Share Insurance Fund from 1.3 percent to 1.39 percent in September 2017. We also acknowledge that NCUA’s reduction of the Overhead Transfer Rate also contributes to the share insurance fund’s equity level, thereby providing a greater distribution that benefits both state and federal credit unions.”

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Regulatory actions and programs Regulatory relief Regulatory reform Compliance Deposit insurance NCUA CUNA NAFCU
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