More than 5,000 credit unions across the country will begin receiving statements this week from their federal regulator outlining their share of a nearly $736 million payout of funds left over in a now-closed program to resolve “corporate” credit unions that failed as a result of the 2008-09 financial crisis.
The credit unions should begin receiving their funds from the payout – $735.7 million – next week, the National Credit Union Administration (NCUA) said in a release Tuesday.
The agency said the statements to be mailed to credit unions this week will indicate the amounts in “dividends” they will receive. “An institution that filed a quarterly Call Report as a federally insured credit union for at least one reporting period in calendar year 2017 will be eligible for a pro rata distribution,” the agency said, noting that the NCUA Board in February approved the final rule detailing the eligibility criteria.
The agency also pointed out in its release that the dividend distribution resulted from the decision by the board to close the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) in October 2017 and transfer that fund’s assets and obligations to the National Credit Union Share Insurance Fund (NCUSIF), as required by law.
The TCCUSF was a fund sent up in the wake of the housing crisis of 2009-10 to resolve troubled corporate credit unions, i.e., credit unions that serve other credit unions.
The board said it closed the TCCUSF last fall because it had “served its purpose of retaining the resolution costs of the five failed corporate credit unions within the credit union system, at no cost to taxpayers.”
The distribution of nearly $736 million is the amount of funds above the “normal operating level” (NOL) of 1.39% of reserves in the insurance fund relative to insured shares of credit unions. Under the law, the reserves above the NOL are available to distribution to credit unions.
Federally insured credit unions paid special assessments to the NCUSIF earlier this decade to cover the costs of closing (resolving) the corporate credit unions. The assessments funded the TCCUSF, which was scheduled to expire in 2021.
However, as NCUA pointed out in its release, net legal recoveries of more than $3.8 billion won by the NCUA on behalf of five failed corporate credit unions decreased the costs to the TCCUSF and made funds available for the distribution next week.