| The National Credit Union Administration on Thursday approved the distribution of of $736 million to eligible, federally insured credit unions in the third quarter of 2018, funds that are available because of the NCUA’s decision in October to close the Temporary Corporate Credit Union Stabilization Fund.
The stabilization fund’s assets were transferred by law to the National Credit Union Share Insurance Fund (NCUSIF). Had the board not closed the stabilization fund, according to the NCUA’s statement, credit unions would not have received a distribution and could have faced premium charges totaling more than $1.3 billion.
“The NCUA’s prudent management of the corporate resolution process has provided us the ability to close the Stabilization Fund four years early,” NCUA Board Chairman J. Mark McWatters said in a statement. “This bipartisan action advances the objectives of protecting member deposits and maintaining a safe and sound credit union system and allows the NCUA to avoid a premium assessment and safely distribute funds to credit unions that can be put to work building local communities, creating new businesses and improving the lives of members across the country.”
“This distribution is historic, larger than the cumulative amount of all previous cash distributions since the capitalization of the Share Insurance Fund,” Board Member Rick Metsger added. “When you add the $736 million credit unions will receive to the more than $1.3 billion in premiums they will avoid, the total is more than $2 billion. This is a huge benefit to credit unions and a lot of money for provident and productive purposes.”
The fund was initially created as part of legislation in 2009 that gave the NCUA the authority to mitigate costs associated with stabilizing the corporate credit union system, which burst when five corporate credit unions failed due to investment losses during the financial crisis.
The purpose of the fund was to mitigate costs suffered by the National Credit Union Share Insurance Fund, which is responsible for covering the losses by the five failed credit unions. The fund’s assets will now be transferred to the NCUSIF.
Under federal law, any NCUSIF premiums or assessments must be shared proportionally by all federally insured credit unions based on the credit union’s insured shares.
Initially, the TCCUSF was not set to expire until June 30, 2021. But McWatters said earlier in 2017 he believed closing the fund would maintain a strong share insurance fund and avoid or minimize premiums to credit unions.
The issue did not come without controversy.
Dan Berger, president and CEO of the National Association of Federally-Insured Credit Unions, opposed closing the earlier than anticipated because of losing out on potential funds.
“NAFCU and the credit unions we represent appreciate the NCUA’s work on this issue, but this approach and outcome are not ideal,” he said in a statement in September.
Berger in a past statement said this proposal of closing the fund would not fairly reimburse credit unions, but rather leave the NCUA with close to $1 billion that belongs to credit unions.
However, Jim Nussle, president and CEO of the Credit Union National Association, said in a statement in September that the NCUA’s decision to close the TCCUSF and begin issuing refunds in 2018 is a victory for credit unions.
“The NCUA board voted to ensure that credit unions will receive the funds they deserve 2018. We thank Chairman McWatters and board member [Rick] Metsger,” he said. “This is a win for credit unions because they are the best stewards of credit union resources. More than 90 percent of credit unions who weighed in during the comment period were in favor of CUNA’s position.”
