Taxes, bills and payments are all words no one really likes. If you are a credit union, another word you would probably add to that list is assessment.
As a result of the unprecedented corporate crisis we faced in 2008 and the resulting tremendous cost to the credit union industry, the NCUA Board for the last five years has had to assess all federally insured credit unions varying amounts to cover these losses. To determine what each assessment would be, the NCUA Board looked at a number of factors: the most current loss projection, the debt owed to the U.S. Treasury, the performance of the legacy assets, the state of the economy and the projected performance of credit unions as a whole.
When all these factors are considered, they are done so at a specific point in time. The most recent announced assessment at the July 2013 NCUA Board meeting was the result of what the Board was able to conclude upon analyzing these numbers.
The debt owed to the Treasury remains large, but the performance of the legacy assets is better than expected. The economy continues to improve, but not as fast as everyone would like. Credit unions, as a whole, are doing well. However, there are some credit unions we would like to see do better.
So with those factors being weighed and considered, the NCUA Board set the 2013 assessment at the lowest end of the previously projected range, right at eight basis points.
Upon doing so, NCUA staff stated that, perhaps, if things continued to improve, then beginning next year there might not be a need for additional assessments for the Temporary Corporate Credit Union Stabilization Fund.
As they say in My Fair Lady, “Wouldn’t it be lovely?” Yes, by all means, it would. And, in keeping with the current projections and performances, it very well may be. Analysts, pundits and bloggers are all calling for future assessments to end. It’s a great thought, applauded by nearly all in the industry.
By the NCUA Board’s July action, I believe we have positioned future Boards to make that type of popular decision. It would be a welcomed action and be yet another signal that the credit unions of this country have done what we said they would. They took care of their own problems without asking the taxpayers of this country to shoulder the loss to bail them out. How many other financial industries can make that claim?
So as we move forward to, hopefully, an assessment-free year in the near future, I offer only one bit of caution: Decisions are made with the facts before you at the time you are making them. Next July, the NCUA Board will consider the state of affairs and with that knowledge in hand make the best possible decision for the industry going forward.
It is too early to definitively make that call right now, but let’s all hope that it will be like Christmas next July and Santa Claus will have given us the gift of nothing.