ALEXANDRIA, Va. – NCUA is preparing to transfer the $5.9 billion cost of the corporate credit union bailout from the National CU Share Insurance Fund to the newly created Corporate CU Stabilization Fund, which would allow credit unions to pay off the bailout charge over seven years.
The transfer of the bailout costs, as allowed under the recently enacted Corporate CU Stabilization Bill, would free up additional resources for the NCUSIF, which is facing financial troubles at dozens of large credit unions, sources familiar with the plans told The Credit Union Journal yesterday.
It will also allow those credit unions that took a charge for some or all of their share of the corporate bailout costs in the first quarter to reverse those charges and stretch them over the seven years, the sources said.
Credit unions that took all of the charge would not be allowed to maintain that charge, but would be required to reverse most of the charges and spread them out over the seven years.
Thousands of credit unions took some or all of the bailout charges in the first quarter, creating a huge $3.2 billion hole for credit unions during the period, amounting to a negative return-on-average assets of 1.51% for the first three months. But almost all of those charges are expected to recaptured and delayed until future years under the NCUA plan.
Under the new bill, the corporate fund will be financed from loans through the U.S. Treasury’s Federal Financing Bank and, like the NCUSIF, would be funded by annual premiums assessed all federally insured credit unions. After seven years, the loans would be paid off and the corporate fund would be merged into the NCUSIF, under the new law.
NCUA is expected to finalize the plans and explain them to credit unions during a webcast later this month.
