CU supervisor looks at insurance program equity distributions, rebates from special stabilization fund

A final rule for calculating pro-rata share distributions of National Credit Union Share Insurance Fund (NCUSIF) equity, and rebates from the now-closed fund  to resolve “corporate credit unions,” will be considered by the NCUA Board at its regular meeting Thursday in Alexandria, Va.

Last summer, the board proposed a rule for calculating equity distribution from the share insurance fund (the insurance program for member savings in credit unions). According to NCUA staff, the purpose of the proposal was to provide credit unions greater transparency regarding the calculation of a federally insured credit union’s proportionate share of a declared equity distribution from the fund.

However, a key portion of the proposal is that it would prohibit a federally insured credit union (FICU) that terminates federal share insurance coverage during a particular calendar year from receiving an NCUSIF equity distribution for that calendar year. The purpose, according to NCUA, is to “provide greater fairness to FICUs that remain federally insured.”

The board will also consider rebates from the Temporary Corporate Credit Union Stabilization Fund (TCCUSF), which was merged into the share insurance fund last fall. The TCCUSF was set up in 2009 to help resolve corporate credit unions (or, credit unions that serve as “bankers’ banks” for credit unions) in the wake of the financial crisis. According to NCUA, the the fund was established “to accrue the losses from five failed corporate credit unions and assess insured credit unions for such losses over time.”

About $600 million to $800 million is expected to be distributed to credit unions this year; additional distributions are possible. The money being rebated is the amount in the insurance fund above its 1.39% “normal operating level” (NOL) of total reserves in the fund relative to insured shares.

Actual amounts to be distributed will be determined in March, the agency has indicated, after year-end 2017 insured shares are reported. Additional information regarding the amount and accounting for any distribution is expected around the end of the second quarter.

With the merging of the corporate stabilization fund into the share insurance fund, the NCUA Board also voted last fall to raise the NOL of the insurance fund to 1.39% (up from 1.3%). At the time, both Board Chairman J. Mark McWatters and Board Member Rick Metsger indicated that the agency would review the operating level on at least an annual basis between 2018 and 2021, “based on relevant data.”

Board Agenda for the February 15, 2018 Meeting