Net assessment range for failed corporates drops $2.3 billion at upper end
NCUA Updates Corporate System Resolution Costs and NGN Program Webpages
ALEXANDRIA, VA (November 22, 2013) — The upper end of the net remaining assessments associated with the Temporary Corporate Credit Union Stabilization Fund declined $2.3 billion between December 2012 and July 2013, the National Credit Union Administration announced today.
The decline in remaining assessments is a combination of a $1.6 billion decrease in expected costs and the $700 million assessment collected in October 2013. Total future remaining assessments are now projected to be no higher than $1.6 billion. At the end of 2012, the projected range was $1.6 billion to $3.9 billion.
The NCUA Board announced at its November 21 meeting that the agency expects no Stabilization Fund assessment for 2014, in part due to the recently announced $1.4 billion settlement with JPMorgan Chase. The estimates for future assessments released today were calculated from data at the end of the second quarter of 2013 and do not include that settlement.
“A great deal of disciplined work and careful planning has kept the Corporate Resolution on-track, and the new estimates are very good news,” NCUA Board Chairman Debbie Matz said. “Our continued recoveries from Wall Street firms responsible for the corporate crisis, now totaling more than $1.75 billion, an improving economy and NCUA’s continuing efforts to effectively manage losses are helping reduce future credit union assessments.”
NCUA released the new projections as part of the semi-annual update of the costs of the Corporate System Resolution
and the performance of the NCUA Guaranteed Notes (NGN) Program
. Since the Stabilization Fund’s creation in 2009, credit unions have paid $4.8 billion in assessments. Although the Stabilization Fund will expire in 2021, assessments may end sooner.
The narrower range of projected remaining assessments reflects the actual performance of the failed corporate credit unions’ legacy assets to date and NCUA’s updated evaluation of the macroeconomic factors used in projecting the future performance of NGNs.
Factors influencing the estimated range include changes in housing prices, interest rates, unemployment rates and mortgage prepayments. NCUA uses BlackRock, an independent securities valuation firm, to project the future performance of the legacy assets in NGNs, a key component of this analysis.
NCUA still has 16 pending lawsuits against other underwriters seeking recoveries on the securities purchased by the failed corporate credit unions. By lowering the cumulative losses on the legacy assets, net recoveries help reduce the assessments that federally insured credit unions will need to pay over time through the Stabilization Fund.
To promote transparency, NCUA will continue providing periodic updates on the estimates about the costs associated with the Corporate System Resolution, the performance of the NGN Program, and the total anticipated assessments that credit unions will pay during the life of the Stabilization Fund, all of which can vary over time. As announced at yesterday’s open Board meeting, the JPMorgan Chase settlement will be incorporated into future assessment range calculations, including a special, high-level website update as of the third quarter of 2013 that NCUA will release in the coming months.
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 U.S. Government, NCUA operates and manages the National Credit Union Share Insurance Fund, insuring the deposits of more than 95 million account holders in all federal credit unions and the overwhelming majority of state-chartered credit unions.