ALEXANDRIA, Va. – NCUA warned corporate credit unions to expect additional impairment of their capital based on the losses for 2008 reported by U.S. Central FCU last Friday.
"It is likely that all invested corporates will record substantial impairment," Mark Treichel, director of NCUA’s Office of Corporate CUs, said in a letter to corporates yesterday.
U.S. Central’s 27 corporate members have already written down the value of their capital in U.S. Central by $1.5 billion, which includes all $750 million of paid-in-capital and $795 million, or 63.7% of membership capital shares. But NCUA’s letter indicates that last week’s report showing $4.9 billion of losses for U.S. Central last year will mean additional write-downs on the remaining $453 million of U.S. Central MCS they hold on their books.
Additional write-downs by the corporates are expected to be passed on to natural person credit unions in many cases.
NCUA said in its letter it expects each corporate to review the U.S. Central report in light of generally accepted accounting principles to determine whether their U.S. Central capital has experienced so-called other-than-temporary impairment requiring recognition on their own financial statements. "In such an event, each corporate must record the impairment in accordance with GAAP," said the letter.
Any impairments must be reported on each corporate’s monthly 5310 Call Report for October, to be submitted to NCUA by November 30.
