ALEXANDRIA, Va.-NCUA has outlined the "good bank/bad bank" model under which four of the five conserved corporates will be transitioned to "bridge corporates."
The goal is to give NCUA time to work with the stakeholders to determine the best resolution, be that a completely new corporate charter, merging with an existing corporate, or seeking alternative service providers.
Connecticut-based Constitution State Corporate, however, will be going through a more traditional purchase and assumption, the agency said. U.S. Central Corporate, Western Corporate, Southwest Corporate, and Members United Corporate will be undergoing the "good bank/bad bank" plan.
Under the "good bank/bad bank" scenario, the good assets of the corporate are transferred to a bridge corporate, which will continue to provide payment services to the old charter's member CUs, while the legacy assets-the troubled securities, largely made up of mortgage-backed securities-will go to the Asset Management Estate (AME), operated by the NCUA's Asset Management Assistance Center in Houston, where they will be securitized and sold off as NCUA Guaranteed Notes (trading under the NGN ticker symbol). NGNs cannot be purchased directly through NCUA; all transactions will go through Barclay's. NGNs will have terms that are no more than 10 years and are eligible investments for credit unions. The proceeds of the notes will help to repay the bridge loan.
