NCUA Assessment Picture Evolves For NW Credit Unions

The assumptions underpinning the Corporate Stabilization Fund and Share Insurance Fund rates are changing again. While there will be an impact on Northwest credit unions, the forecasted changes do contain some good news for those budgeting for the coming year and beyond.

CUNA modeled assessment requirements last November based on available information. Failure experience of natural person credit unions, however, is down from forecasts meaning a change in insurance fund requirements that should lighten the financial load for members. The Corporate Stabilization Fund picture is less clear though, with two options still on the table to erase the estimated $8.1 billion loss in legacy assets. The primary change in forecast includes:

  1. The National Credit Union Share Insurance Fund has performed better than expected during the last four months because of lower credit union failure rates. The good news for NWCUA members is that a share insurance premium may not be necessary this year. NCUSIF has a substantial reserve fund of around $1.2 billion. A gradual improvement in the financial condition of credits unions may well have reserves considered “over funded,” thereby eliminating the need for a premium in the immediate future. CUNA had previously forecasted a 5 bp NCUSIF premium in both 2011 and 2012. CUNA now assumes no NCUSIF premiums in their revised estimates.
  2. The Corporate Stabilization Fund was estimated to need around $740 million per year over an 11-year period, totaling $8.1 billion. CUNA now estimates, that because of cash management needs, the Fund may need to be fronted $2 billion in the first two years of the 11-year cycle. CUNA is urging NCUA to collect the $2 billion in a prepaid assessment, but to allow credit unions to expense the charge over two or three years. Since the plan is uncertain, CUNA forecasts that assessments for 2011 will be about $1.5 billion.
  3. Estimates comparing bank (FDIC) and credit union (NCUA) assessment rates have also been modified. In summary, a change in the base calculation for FDIC assessments has had the effect of transferring much of the burden of rebuilding FDIC’s fund balance from small community banks to larger institutions. The change in the base rate for banks results in prospective FDIC assessments now being slightly lower than NCUA rates.

Bill Hampel, Chief Economist for CUNA, has issued a detailed analysis of current assessment projections and NWCUA members can read the complete analysis in the link below:

Questions? Contact Director of Regulatory Advocacy Jaycee Winn: 503.350.2209, jwinn@nwcua.org.

Posted in CUNA, NCUA.