NCUA Extends Guarantee On Corporate Deposits

Published April 21, 2009, 5:03 p.m. EDT

Updated August 27, 2020, 12:42 a.m. EDT

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ALEXANDRIA, Va. – The NCUA Board voted yesterday to extend the corporate share guarantee program to accommodate a two-year rolling expiration date on deposits and provide the option of quarterly extensions through December 2012.

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The share guarantee program is part of the $5.9 billion corporate credit union bailout that credit unions are paying for through adjustments to their National CU Share Insurance Fund deposits. The program guarantees all deposits in corporates beyond the nominal $250,000 per account coverage for accounts at natural person credit unions.

The guarantee program covers all shares, excluding paid-in-capital, membership capital accounts, and other NCUA liquidity programs in corporates that are participating on a voluntary basis. There are 23 corporates participating and four that have opted not to participate. NCUA has reopened the program to allow those four to opt in to the program.

"The action of the NCUA Board sends a clear signal to natural person credit unions that their investments in corporate credit unions are not only safe, but also meet sound asset liability management principals by providing for orderly laddering of these investments," said NCUA Chairman Michael Fryzel in a statement."It is important that they continue to provide the liquidity that is needed to maintain corporate stability."

To stabilize cash flows and allow for an orderly laddering of investments, the NCUA Board approved a recommended rolling two-year term for the guarantee program that will operate as follows:

* Maximum 2-year maturity for new share deposits is covered under the guarantee. Existing deposits maturing before the expiration date are covered by the guarantee, regardless of the original term.

* Initial extension of the December 31, 2010, expiration date to September 30, 2011.

* At least 30 days prior to the end of each calendar quarter, starting September 2009, the Office of Corporate CUs will evaluate the need to extend the expiration date; and, with concurrence of the director of Examination and Insurance, request the Executive Director approve and announce extension of the guarantee to two years beyond the end of the following quarter. Thus, if an extension is approved in September 2009, the guarantee would extend to December 31, 2011. The Executive Director will announce expiration date extensions at least 15 days before each quarter ends.