Upper End of Projected Losses for Failed Corporate Credit Unions Falls $900 Million
NCUA Updates Corporate System Resolution Costs and NGN Program Webpages
ALEXANDRIA, Va. (March 28, 2013) – Total projected assessments associated with the Temporary Corporate Credit Union Stabilization Fund (Stabilization Fund) declined $900 million at the upper end between July 2012 and December 2012, the National Credit Union Administration (NCUA) announced today. Total future remaining assessments are now projected to range between $1.6 billion and $3.9 billion. In comparison, six months ago the total range was $1.9 billion to $4.8 billion.
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 on www.ncua.gov.
“According to the latest forecast, the top end of the range of total Stabilization Fund assessments declined by $900 million during the last six months of 2012—which is very good news,” NCUA Board Chairman Debbie Matz said. “The decline reflects an improving economy and NCUA’s continuing efforts to effectively manage losses from the corporate failures to reduce future credit union assessments.”
As a reminder, the NCUA Board announced in November 2012 that the assessment range for 2013 would be between 8 basis points and 11 basis points of insured shares. That range has not changed. The Board plans to vote on the 2013 assessment amount at an open Board meeting this summer, and the Board plans to continue setting each assessment amount annually.
Since the Stabilization Fund was created in 2009, credit unions have paid $4.1 billion in assessments. Although the Stabilization Fund will expire in 2021, assessments may end sooner.
Interested parties can access Questions and Answers – 2012 Corporate System Resolution Costs and 2013 Assessments, 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 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.
The updated range of total future Stabilization Fund assessments includes the net proceeds from more than $170 million in legal settlements that NCUA received from Wall Street firms, as of December 31, 2012. Additionally, NCUA has filed lawsuits against nine 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 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 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.
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 nearly 94 million account holders in all federal credit unions and the overwhelming majority of state-chartered credit unions.