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NCUA: Further Assessments for Corporate Stabilization Fund Unlikely
Thursday, September 22, 2016 6:50 AM

The National Credit Union Administration has announced that credit unions are unlikely to see further assessments for the Temporary Corporate Stabilization Fund.

The fund was created following the failure of several corporate credit unions as a result of the 2008 financial crisis, and credit unions have paid $4.8 billion in assessments since the fund was created in 2009. The regulator said in a release Wednesday that the upper and lower ends of the projected assessment range remain negative, ranging from negative $2.4 billion to negative $4 billion, respectively, and that as long as both ends of that range remain in negative numbers, CUs are unlikely to see further assessments.

"We have come a long way since the days when the credit union system faced up to $10.5 billion in possible Stabilization Fund assessments," NCUA Board Chairman Rick Metsger said. "The carefully guided corporate resolution strategy, an improving economy and the agency's determination to hold Wall Street firms accountable have together put federally insured credit unions in a position for a much less intimidating outcome. If these trends continue, credit unions can expect no further Stabilization Fund assessments."

Assessment projections are based on the performance of the failed corporates' legacy assets, legal recoveries and economic variables such as interest rates, unemployment and housing costs. Those variables and projections are subject to change. NCUA uses BlackRock, an independent securities valuation firm, to project the future performance of the legacy assets in the NCUA Guaranteed Notes Program.

NCUA is still obligated to repay $1 billion in outstanding borrowings from the U.S. Treasury, down from a peak of $5.1 billion in 2012. Principal and interest on the NCUA Guaranteed Notes, as well as other obligations of the Stabilization Fund, also must be fully repaid before NCUA can distribute any remaining funds to credit unions.

The regulator also has recovered approximately $3.2 billion from the Wall Street firms that sold the faulty mortgage-backed securities to the failed corporate credit unions. NCUA is using the net proceeds from these settlements to reduce the costs that federally insured credit unions need to pay for the corporate resolution.

More information about Corporate Resolution Program costs incurred to date and projected future Stabilization Fund assessments is available online at the agency's Questions and Answers page.

Source:  Credit Union Journal