ALEXANDRIA, Va. – NCUA is reviewing several options to resolve the spiraling losses among the corporate credit unions, including a takeover of the most troubled corporates or bringing as many as eight of the corporates under strict supervisory agreements, according to several sources.
The supervisory agreements, at the least would require the corporates to submit capital building and asset-mitigation plans to the federal credit union regulator, the sources told The Credit Union Journal.
The NCUA Board met last week in closed session to review some of the options, which are dwindling because of the growing losses on the corporates’ books. At the meeting the Board discussed a report on the corporates prepared by consultants PriceWaterhouseCoopers that laid out some of the options. Among them are: to merge some of the most troubled corporates; take some of the corporates under conservatorship; or issue strict supervisory agreements curtailing the corporates’ activities and requiring a capital building plan.
The deliberations come as the corporates are preparing to issue their year-end financial statements which are expected to detail additional unrealized losses on the corporates’ books–on top of almost $18 billion in unrealized losses through November. The vast majority of those unrealized losses are on the books of just seven corporates, though most other corporates hold some unrealized losses on their books.
Discussed during the NCUA deliberations was whether NCUA could take some of the troubled assets off the corporates’ books in some way, perhaps through the emergency loan fund, the Central Liquidity Facility.
Most troubling for the regulator is though much of those unrealized losses are part of securities that may regain some of their market value, billions of the losses are part of securities that are widely expected to be permanently impaired, like mortgage-backed securities rated below investment grade; unrated Collateralized Debt Obligations; subprime or Alt-A asset-backed securities, as well as investments tied to failed Wall Street brokerage Lehman Brothers.
The PWC study is one of several being reviewed by NCUA concerning the corporates, including a plan submitted by the Association of Corporate CUs and another submitted by credit union consultants The Rochdale Group, which was commissioned by Member Gateways LLC.
NCUA officials refused to comment, saying the Board continues to deliberate on the matter.
