NCUA to Close Temporary Stabilization Fund and Issue Refunds to Credit Unions
The NWCUA and member credit unions advocated for this win for the Credit Union Movement.
The National Credit Union Administration (NCUA) Board voted Thursday, Sept. 28, to close the Temporary Corporate Stabilization Fund and set the normal operating level at 1.39%. This action, effective Oct. 1, 2017, will merge the stabilization fund into the National Credit Union Share Insurance Fund, and enable credit unions to receive refunds beginning next year.
In collaboration with member credit unions, the Northwest Credit Union Association (NWCUA) advocated for the fund’s closure and for distribution of overpaid assessments proportional to what was paid by individual credit unions.
NWCUA President and CEO Troy Stang expressed appreciation for NCUA’s consideration of Northwest credit unions’ recommendations, and called the closure of the temporary fund a “win.”
“This is very good news for credit unions,” said Stang. “The temporary fund distributions to credit unions will support their continued efforts to offer real tangible value to their members.”
Association member credit unions provided input in many ways. More than 60 credit unions joined a call to share thoughts and suggestions on closing the Stabilization Fund, with member input informing the Association letter. Nearly 30 Northwest Credit unions sent individual letters speaking with one voice expressing support for merging the Temporary Corporate Stabilization Fund into the Share Insurance Fund and giving equity distributions to credit unions beginning in 2018. In addition, Northwest advocates met with Board Member Metsger and senior NCUA staff during the recent Fall Hike the Hill, appealing for the immediate closure of the Stabilization fund.
NCUA estimates the 2018 refund pool for credit unions will range from $600 million to $800 million, “absent any significant changes in the economy or the Share Insurance Fund’s performance.”
“Returning overpayments in assessments from the Corporate Stabilization Fund is a win for credit union members,” said John Trull, NWCUA’s Assistant Vice President of Regulatory Advocacy.
In a Sept. 5 comment letter to the NCUA, the Association recommended a normal operating level of 1.34% to cover new exposure risks to the share insurance fund created by legacy assets from the Temporary Corporate Stabilization Fund.
“Your Association will continue to advocate for additional distribution of funds, and reduction in the normal operating level as the risks associated with the legacy assets decline,” Trull said.
The temporary fund was established in 2009, after five corporate credit unions failed during the recession. The NCUA assessed credit unions to build the fund, so losses would not impact the National Credit Union Share Insurance Fund (NCUSIF), which insures the accounts of more than 100 million credit union members nationwide. NCUA successfully sued many of the Wall Street investment firms responsible for the corporate credit unions’ losses. Settlements of over $5.1 billion in combination with credit unions’ contributions built the temporary fund’s liquidity to levels where NCUA is now able to issue refunds to credit unions.