Credit Unions Could Pay 10 BP for Next Six Years for Corporate Stabilization
On the heels of a recent audit, CUNA’s Bill Hampel suggests that in order for credit unions to pay back the remaining $5.2 billion in corporate stabilization funds, the industry could be paying 10bp for the next six years.
June 28, 2012
Audited financial statements show that credit unions could be paying 10 basis points on all insured deposits for the next six years to pay back the Treasury for its cash infusion of the National Credit Union Administration’s (NCUA’s) Corporate Stabilization Fund.
The NCUA didn’t provide analysis for its latest report, but according to Credit Union National Association (CUNA) Chief Economist Bill Hampel, credit unions “can infer from the financial statements that as of last December, NCUA’s estimates of the ultimate costs of the corporate stabilization are essentially unchanged from what they were at the end of 2010.”
“This is based on the fact that the improvement in the Total Net Position of the Fund of approximately $2.2 billion (from $7.5 billion as of December 2010, to $5.3 billion as of December 2011) just about equals the sum of the last year’s assessment ($1.95 billion) and the transfer of excess equity from the share insurance fund of $0.28 billion,” Hampel stated in a letter to CUNA President Bill Cheney.
The $5.3 billion Hampel refers to is the amount remaining to be assessed to credit unions. Considering this loss estimate, and the fact that the NCUA has consistently said that final assessments for the corporate stabilization fund will be in the 8-11 basis point range, “it would require annual assessments of approximately 10 basis points for the next 5 to 6 years to pay off the total resolution costs,” stated Hampel.
This most recent estimate is higher than most credit unions expected after the NCUA website optimistically indicated that the remaining assessments were in the “$1.9 billion to $6.2 billion” range.
“To see that loss estimates rise as signs of a housing market rebound begin showing is unfortunate,” says Northwest Credit Union Association CEO John Annaloro. “As affected portfolios undergo an industry review over the next few months, credit unions will soon have a more thorough understanding of what they are facing.”
According to CUNA, this year’s assessment will be on the agenda for the NCUA’s July 24 board meeting.
To view the Stabilization Fund’s 2011 audited financial statements, go to: http://www.ncua.gov/about/Leadership/CO/OIG/Pages/AuditRpt2012.aspx.
Bill Hampel’s letter to Bill Cheney is available here.
Questions or Concerns? Contact Matt Halvorson, Anthem Editor: email@example.com.