ALEXANDRIA, Va.-Federally insured credit unions will not be charged a premium to increase the coverage of the National Credit Union Share Insurance Fund to $250,000 per account.
The increase in federal deposit insurance by the Federal Deposit Insurance Corp. and the National Credit Union Administration was part of the $700 billion bailout passed by Congress last week in an effort to shore up depositor confidence. The increase in coverage went into effect immediately after President Bush signed the bill Friday.
Credit union lobbyists got language into the bill at the last minute saying that the increase cannot be used to calculate any increase in deposit premiums. John McKechnie, the NCUA's chief spokesman, said that any premium increases would have to be based on the $100,000 limit on deposit coverage.
But an increase in payouts based on the new coverage of $250,000 per account could tax the already stressed credit union fund, which has been hammered by several credit union failures in the past six months. The fund currently insures about 97% of all credit union deposits but will now insure almost 100%, increasing the likelihood the NCUSIF will pay out more for credit union failures in coming months.
With the fund's reserves declining in recent months, NCUA officials are already considering whether they must charge credit unions a premium next year to replenish reserves.
