Upper end of projected loss range for failed corporates continues decline

ALEXANDRIA, VA (March 18, 2014) – Total projected assessments associated with the Temporary Corporate Credit Union Stabilization Fund declined $2.2 billion at the upper end between July and December 2013, the National Credit Union Administration announced today, the sharp drop due largely to the JPMorgan Chase settlement in November 2013.

The current projected range for total future remaining assessments is now between negative $2 billion and negative $600 million. At the end of the second quarter of 2013, the total range was negative $200 million to $1.6 billion. The overall rate of change in the assessment range is consistent with recent trends, and the continued improvement in the performance of the legacy assets underlying the NCUA Guaranteed Note program.

“The more than $1.75 billion in recoveries from NCUA’s litigation has certainly brought relief to credit unions, but it’s also good to see the general trends continuing,” NCUA Board Chairman Debbie Matz said. “An improving economy and NCUA’s continuing efforts to effectively manage losses from the corporate failures at this time make us hopeful that we will not need to make future credit union assessments.”

NCUA’s Board announced at its November 2013 meeting there would be no planned Stabilization Fund assessment in 2014. As long as both ends of the projected range of net remaining assessments remain negative, there will likely be no need for future assessments.

Since the Stabilization Fund was created in 2009, credit unions have paid $4.8 billion in assessments.

The agency currently has $2.9 billion in outstanding borrowings from the U.S. Treasury related to the corporate credit union resolution. The Stabilization Fund will expire in 2021.

NCUA released the new projections as part of the online semi-annual update of the costs of the Corporate System Resolution and the performance of the NCUA Guaranteed Notes Program.

Interested parties can access Questions and Answers, a document containing the latest information about costs incurred to date and projected future assessment ranges over the life of the Stabilization Fund.

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 the NCUA Guaranteed Notes. 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 the NCUA Guaranteed Notes, a key component of this analysis.

NCUA has litigation pending against several other Wall Street firms, seeking recoveries on faulty securities purchased by the failed corporate credit unions, as well as litigation against 13 banks, alleging violations of federal and state anti-trust laws by manipulation of interest rates in the London Interbank Offered Rate system. By lowering the cumulative losses on the legacy assets, any additional net recoveries will help reduce the assessments that 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 losses associated with the Corporate System Resolution, the performance of the NCUA Guaranteed Notes, and the total anticipated assessments that credit unions will pay during the life of the Stabilization Fund, all of which can vary over time.

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 96 million account holders in all federal credit unions and the overwhelming majority of state-chartered credit unions.

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