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CUNA Outlines Way to Equitable, Proportional TCCUSF Refunds
Wednesday, September 6, 2017 6:35 AM

Credit Union National Association wrote to NCUA on Tuesday about the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) and the agency’s proposal to update its share insurance rule in order to facilitate distribution of funds. Updating the rule, CUNA said, addresses the only way allowed by the Federal Credit Union Act to distribute funds after closing the TCCUSF. 

In the proposal, NCUA laid out two potential methods to distribute funds, a first-in, first-out method or a last-in, last-out method. However, CUNA believes each method will result in payouts favoring different classes of credit unions, and neither would distribute refunds in proportion to total assessments paid.

“We suggest that NCUA prorate all refunds during the special distribution period on the basis of total stabilization assessments paid by each credit union from 2009 to 2013,” the letter reads. “This method of accounting and payment would ensure that future refunds from the Corporate Stabilization program are based on the actual amount of stabilization assessments paid by each credit union, and current and future costs of the share insurance fund are paid on the basis of contemporaneous insured shares.

This method would also be transparent and equitable, which is important in the repayment of credit unions’ money,” the letter adds.

Specifically, CUNA believes NCUA should:

  • Aggregate the total assessments paid by each credit union and calculate each credit union’s share of the total equity to be transferred from the stabilization fund to the National Credit Union Share Insurance Fund (NCUSF) based on its share of total assessments collected; and
  • Charge this amount for each credit union by the amount necessary to increase the NCUSIF equity ratio to its historical normal operating level (NOL) of 1.3 percent based on each credit union’s current insured shares.

“Should NCUA decide to raise the NOL above 1.34 percent for reasons having to do with the share insurance Fund’s future projected operations (an increase CUNA does not support), the amount necessary to make that increase should be debited to total assessment refunds based on current insured shares,” the letter reads. “It should be noted that CUNA supports a NOL of 1.3 percent, but we will not oppose NCUA’s proposed 4 basis points while the NCUSIF holds volatile assets from the TCCUSF.”

See CUNA’s Removing Barriers Blog for additional details and a link to the letter.

CUNA is the only national trade association for credit unions advocating for refunds to begin in 2018.

Source: CUNA News