Two major credit union advocacy groups are in disagreement over the National Credit Union Association’s proposed plan to close the Temporary Corporate Credit Union Stabilization Fund sometime this year.
Legislation passed in 2009 gave the NCUA the authority to mitigate costs associated with stabilizing the corporate credit union system that was ruptured when five corporate credit unions failed due to investment losses during the financial crisis.
To mitigate costs suffered by the National Credit Union Share Insurance Fund, the NCUA implemented the TCCUSF to mitigate costs other credit unions would have to pay to cover the losses by the five failed credit unions. 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 NCUA Chairman Mark McWatters in February said the TCCUSF might close, saying he believed it would maintain a strong share insurance fund and avoid or minimize premiums to credit unions.
If it closes, assets from the TCCUSF will be transferred to the NCUSIF.
Recently, the Credit Union National Association came out in full support of the plan, while the National Association of Federally-Insured Credit Unions said they continue “to urge the NCUA for more due diligence before taking action.”
“CUNA’s number one priority is to ensure credit unions get their money back in 2018, no later, and we will advocate to ensure nothing slows down the process,” CUNA President and CEO Jim Nussle said in a statement. “We engaged throughout this process with members of our Examination and Supervision subcommittee, leagues and CUNA member credit unions, and feedback has been consistent that refunds should be given to credit unions as soon as possible.”
NAFCU President and CEO Dan Berger said the NCUA should take a hard look because by closing the TCCUSF early, credit unions may not get the full amount of refunds they are owed for covering the failed credit unions.
“NAFCU has always supported credit unions getting full and fair refunds from the stabilization fund as soon as possible,” Berger said in a statement. “Unfortunately, NCUA’s proposal to close the stabilization fund and increase the normal operating level for the share insurance fund from 1.3 percent to 1.39 percent falls woefully short of that. Per this increase in the normal operating level, the agency would be holding onto close to $1 billion that rightfully belongs to credit unions.”
Nussle acknowledged CUNA had concerns with the raise in normal operating level, and recommended the NCUA temporarily increase the normal operating level by four basis points to insulate the NCUSIF from legacy asset volatility.
Nussle also said CUNA is pushing the NCUA to explicitly state the increase in the normal operating level is temporary, and would only last until the legacy assets remain on the NCUSIF’s balance sheet.
