National Credit Union Administration reports continued improvement in corporate resolution costs
Metsger: “Credit unions can expect no further stabilization fund assessments”
ALEXANDRIA, VA (September 21, 2016) — Updated information on the costs of the Corporate Resolution Program and the performance of the NCUA Guaranteed Notes Program is now available online, the National Credit Union Administration announced today.
The upper and lower ends of the projected assessment range for the Temporary Corporate Credit Union Stabilization Fund remain negative, from negative $2.4 billion to negative $4 billion, respectively. As long as both ends of the range remain negative, it is unlikely NCUA will charge credit unions future Stabilization Fund assessments.
“We have come a long way since the days when the credit union system faced up to $10.5 billion in possible Stabilization Fund assessments,” NCUA Board Chairman Rick Metsger said. “The carefully guided corporate resolution strategy, an improving economy and the agency’s determination to hold Wall Street firms accountable have together put federally insured credit unions in a position for a much less intimidating outcome. If these trends continue, credit unions can expect no further Stabilization Fund assessments.”
Credit unions have paid $4.8 billion in assessments since the creation of the Stabilization Fund in 2009. The Stabilization Fund is scheduled to close in 2021.
The assessment projections are based on the performance of the failed corporates’ legacy assets, legal recoveries and economic variables such as interest rates, unemployment and housing costs. Those variables and projections are subject to change. NCUA uses BlackRock, an independent securities valuation firm, to project the future performance of the legacy assets in the NCUA Guaranteed Notes Program.
NCUA is still obligated to repay $1 billion in outstanding borrowings from the U.S. Treasury, down from a peak of $5.1 billion in 2012. Principal and interest on the NCUA Guaranteed Notes, as well as other obligations of the Stabilization Fund, also must be fully repaid before NCUA can distribute any remaining funds to credit unions.
More information about Corporate Resolution Program costs incurred to date and projected future Stabilization Fund assessments is available online at the Questions and Answers page.
NCUA also has recovered approximately $3.2 billion from the Wall Street firms that sold the faulty mortgage-backed securities to the failed corporate credit unions. NCUA is using the net proceeds from these settlements to reduce the costs that federally insured credit unions need to pay for the corporate resolution.
NCUA will continue providing periodic updates on the estimates of the costs associated with the Corporate Resolution Program, the performance of the NCUA Guaranteed Notes Program, and the total anticipated assessments credit unions will pay during the life of the Stabilization Fund.
About National Credit Union Administration (NCUA)
The NCUA is the independent federal agency created by the U.S. Congress to regulate, charter and supervise federal credit unions. With the backing of the full faith and credit of the United States, the NCUA operates and manages the National Credit Union Share Insurance Fund, insuring the deposits of more than 135 million account holders in all federal credit unions and the overwhelming majority of state-chartered credit unions. The NCUA also protects consumers and educates the public on consumer protection and financial literacy issues.