ALEXANDRIA, Va. – NCUA said the reserve ratio for the National CU Share Insurance Fund remained just above the 1.2% mark for July but is projected to fall below the magic number by the end of August, triggering a requirement to bring Congress into deliberations for replenishing reserves.
As in June, NCUA only was able to tread above the congressionally mandated 1.2% level in July because of tens of millions of dollars in projected payments by credit unions will be coming in September and October to maintain their 1% NCUSIF deposit.
"As federally insured credit unions are statutorily obliged to fund the 1% contributed capital, NCUA is allowed to use it in calculating our equity ratio for purposes of invoking the restoration plan requirement. NCUA analysis shows that the equity ratio was above 1.2% in both June and July,” said John McKechnie, chief spokesman for the agency.
But the continued drain on reserves is projected to push the ratio below 1.2% by Aug. 31, triggering a requirement that NCUA notify Congress and provide a plan within 90 days on restoring the reserve level, a net worth restoration plan.
“That constitutes our notification requirement,” said McKechnie. “The August financial statement where we project the equity ratio to drop below 1.2% has not yet been completed, and the restoration plan requirement has not been triggered."
The NCUA Board has made it clear a net worth restoration plan will include an assessment on all federally insured credit unions later this year.
The decline in reserves below the congressionally mandated minimum comes a little more than a year after the assessment of $658 million on credit unions to replenish NCUSIF reserves, and 15 months after passage of a new law creating the corporate credit union bailout fund, moving some $7 billion of liabilities off the books of the NCUSIF.
