A fund set up to stabilize corporate credit unions in the wake of the economic downturn will be merged Oct. 1 with the National Credit Union Share Insurance Fund (NCUSIF), setting the stage for credit unions to receive “distributions” early next year of between $600 million and $800 million, following action Thursday by the National Credit Union Administration (NCUA) Board.
The board voted unanimously to merge the Temporary Corporate Credit Union Stabilization Fund (TCCUSF), set up in the aftermath of the financial crisis in the late 2000s, with the fund that insures savings at credit unions.
In making the decision, NCUA said that the actual amount of the distribution will be determined in March 2018, after year-end insured shares are reported. (The “distribution” is the amount that will be in the insurance fund that is more than that the agency determines it needs as the “normal operating level” of the fund.)
Although the estimated amount of distributions is $600 million to $800 million, the agency cautioned that actual results may vary due to: extraordinary losses and/or failures in credit unions; unusual or abnormally high insured share growth; economic conditions that involve greater volatility in one or more market indicators as compared to the stress scenarios modeled; extraordinary losses on the Legacy Assets resulting in higher than anticipated guaranty payments from NCUA
The agency said it will issue additional information regarding amount and accounting for any distribution in the second quarter of 2018.
Board Chairman J. Mark McWatters, and Board Member Rick Metsger, also pointed out that additional distributions may be made after 2018. According to a staff briefing, that amount could range from between $600 million and $1.1 billion, depending on economic and other factors.
Also, the board voted to raise the “normal operating level” of the fund to 1.39% of reserves to total insured shares, up from 1.33%. However, both McWatters and Metsger indicated that the agency would review the operating level on at least an annual basis between 2018 and 2021, “based on relevant data.”
NCUA materials: Closing the Corporate Stabilization Fund and Setting the Normal Operating Level