ALEXANDRIA, Va. NCUA yesterday reduced its projections for future corporate credit union assessments and estimated this year’s assessments will be between eight and 11 basis points, or $800 million to $1.1 billion.
The agency said projections for the future cost of the corporate bailout will be between $1.6 billion and $3.9 billion, down from between $1.9 billion and $4.8 billion six months ago, as a result of an improvement in the economy, which affects the assets in the estates of the five failed corporates.
So far, federally insured credit unions have paid about $10 billion as a result of the failure of U.S. Central FCU, WesCorp FCU, Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU. That includes $5.6 billion of lost capital in the five corporates and $4.1 billion of assessments over the past three years. Last year, NCUA also transferred $280 million from the National CU Share Insurance Fund to help pay bailout costs.
Using NCUA’s figures, the total cost of the corporate bailout will be between $11.6 billion and $14.8 billion.
Including another $1 billion of losses realized by the surviving corporates, the total cost of the corporate meltdown is projected to be around $15.8 billion.
Federally insured credit unions paid $1.3 billion in corporate assessments in 2010; $2 billion in 2011 and $792 million in 2012.
The narrower range of projected remaining bailout costs reflects the actual performance of the failed corporate credit unions’ legacy assets to date and NCUA’s updated evaluation of the macroeconomic factors used in projecting the future performance of NCUA Guaranteed Notes, which are the main source of funding for the corporate stabilization. Factors influencing the estimated range include changes in housing prices, interest rates, unemployment rates and mortgage prepayments. NCUA said it uses BlackRock, an independent securities valuation firm, to project the future performance of the legacy assets in NGNs, a key component of this analysis.
The corporate bailout is being subsidized by low-interest loans from the U.S. Treasury, which amounted to $5.1 billion at December 31, at a rate of just 0.191%. The below-market rate is tied to the one-year Treasury rate.
The NCUA Board will vote on an assessment for 2013 at its July meeting and the assessment will be due by the end of September.
