| The National Credit Union Association closed the Temporary Corporate Credit Union Stabilization Fund on Oct. 1, meaning the NCUA could distribute between $600 million to $800 million to federally insured credit unions in 2018, barring no significant changes in the economy.
In addition to closing the fund, the NCUA raised its net operating level from 1.3 to 1.39 percent.
The fund was created as part of legislation in 2009 that gave the NCUA the authority to mitigate costs associated with stabilizing the corporate credit union system, which burst when five corporate credit unions failed due to investment losses during the financial crisis.
The purpose of the fund was to mitigate costs suffered by the National Credit Union Share Insurance Fund, which is responsible for covering the losses by the five failed credit unions. The fund’s assets will now be transferred to the NCUSIF.
Under federal law, any NCUSIF premiums or assessments must be shared proportionally by all federally insured credit unions based on the credit union’s insured shares.
“The NCUA board must meet its obligation to protect insured member deposits and uphold the responsibility that comes with being backed by the full faith and credit of the United States,” NCUA Board Chairman J. Mark McWatters said in a statement last week following the decision. “Prudent administration of the Insurance Fund and protecting member deposits are paramount to maintaining a safe and sound credit union system and public confidence in federal share insurance. This bipartisan action advances these objectives and allows the NCUA to safely distribute funds to credit unions that can be put to work building local communities, creating new businesses and improving the lives of members across the country.”
Initially, the TCCUSF was not set to expire until June 30, 2021. But McWatters said earlier in the year he believed closing the fund would maintain a strong share insurance fund and avoid or minimize premiums to credit unions.
Jim Nussle, president and CEO of the Credit Union National Association, said in a statement that the NCUA’s decision to close the TCCUSF and begin issuing refunds in 2018 is a victory for credit unions.
“The NCUA board voted to ensure that credit unions will receive the funds they deserve 2018. We thank Chairman McWatters and board member [Rick] Metsger,” he said. “This is a win for credit unions because they are the best stewards of credit union resources. More than 90 percent of credit unions who weighed in during the comment period were in favor of CUNA’s position.”
But Dan Berger, president and CEO of the National Association of Federally-Insured Credit Unions, which opposed closing the TCCUSF this early, was less than thrilled with the decision.
“NAFCU and the credit unions we represent appreciate the NCUA’s work on this issue, but this approach and outcome are not ideal,” he said in a statement. “While we welcome credit unions getting some back in 2018, raising the NOL by 9 basis points is unprecedented and unnecessary. Two-thirds of all who commented on the proposal – including our members – opposed such a dramatic increase and rightly so.”
Berger in a past statement said this proposal of closing the fund and raising the NOL to 1.39 percent would not fairly reimburse credit unions, but rather leave the NCUA with close to $1 billion that belongs to credit unions.
According to the NCUA, there may anywhere from $600 million to $1.1 billion of potential future distributions. The method used to determine that distribution will be subject to the board’s decision on a proposed rule currently under agency review.
