Term on 10 BP Corporate Stabilization Reduced by One Year, According to New Estimate

After the National Credit Union Administration (NCUA) added updated information to its website last week revealing the estimated range of future assessments to be at $2.7 billion to $6 billion, new interpretations of the data conclude that credit unions will be paying 10 basis point assessments on $4.4 billion for between four and five years, rather than the $5.3 billion for five-to-six years as was estimated just days earlier.

Bill Hampel, the Credit Union National Association’s (CUNA’s) chief economist, stated in a June 29 letter to CUNA President Bill Cheney that he believes this latest shift means that the Federal regulator used an abundance of caution in developing the audited financial statements.

“Since the $5.3 billion estimated Net Position is 80 percent of the way to the top of the projected range, the Net Position would appear to be a ‘very-unlikely-to-be-exceeded’ number than a ‘most-likely’ number,” he wrote. “What this highlights is trying to determine the actual remaining costs of the corporate stabilization fund is fraught with uncertainty.”

The latest data interpretation came just three days after another Hampel-to-Cheney letter was made public that indicated 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 NCUA’s Corporate Stabilization Fund—an estimate higher than expected after the NCUA website optimistically indicated that the remaining assessments were in the “$1.9 billion to $6.2 billion” range.

But still, no one will know for sure until the end date is closer. The latest data interpretation by Hampel supports this conclusion when he refers to the last four pages of the footnotes to the fund’s audited financial statements, where the uncertainty is explained in detail.

“What we can say for sure is that the better the performance of the housing market and overall economy, the lower will the ultimate costs be,” he wrote. “Personally, considering the implications to NCUA of having published estimates that ended up being too low after all is said and done, I suspect they are especially conservative in developing the range of likely future assessments, and rightfully so.  In other words, it would not surprise me at all for the ultimate costs to be down in the lower portion of the range.”

Good news for credit unions.

 

Questions or Concerns? Contact Matt Halvorson, Anthem Editor: mhalvorson@nwcua.org.

Posted in Compliance, Federal, NCUA.