ALEXANDRIA, Va. – NCUA told credit unions yesterday they can expect to pay an additional charge of about $1 billion into the National CU Share Insurance Fund this September.
The charge is separate from a $1 billion payment credit unions will make this year in the attempt to revive U.S. Central FCU and WesCorp FCU.
"It could be higher. It could be lower. That’s our best estimate," said NCUA’s Chief Examiner Melinda Love during yesterday’s webinar explaining the corporate credit union bailout.
NCUA is currently estimating the NCUSIF premium at 15 basis point (0.15% of assets), equating to about $1 billion. The premium is expected to be voted at the NCUA Board’s September meeting.
The NCUSIF premium comes as many credit unions are expected to accrue additional charges for depleted capital in their corporates, Love acknowledged.
The total bill to credit unions for this year will be at least $3 billion, wiping out all of any projected net income for the year.
At least half a dozen large corporates have indicated they will be taking a charge against their capital due to the loss of their capital in U.S. Central and losses on their mortgage backed securities. WesCorp’s 1,022 members are in the process of charging off $2 billion in the failed corporate, and Members United Corporate FCU, Constitution Corporate FCU and Southwest Corporate FCU have all indicated they will be taking charges against capital.
The news comes as NCUA approved new guidelines for its corporate bailout, which will allow NCUA to transfer the $5.9 billion program from the NCUSIF to a newly created Corporate CU Stabilization Fund and stretch out the costs over seven years, instead of one. That means that credit unions will be charged $1 billion this year for the program.
NCUA’s Love explained the NCUSIF premium will be needed to replenish the fund’s reserves to a mandated ratio of 1.3% (dollars reserved per $100 of insured shares). The reserves have been depleted because of the additional costs to resolve troubled credit unions, as well as a dilution of the reserves by the increase in coverage to $250,000 per account, from $100,000. This will add about $50 billion of insured deposits to the NCUSIF’s coverage.
In addition, there has been faster than-expected deposit growth as consumers flee to the safety of federally insured instruments. Credit union shares have grown more than 6% through the first four months, according to CUNA.
