NCUA announced it has reached a $1.1 billion settlement with the Royal Bank of Scotland, arising from the sale of allegedly faulty mortgage-backed securities to two corporate credit unions.
The settlement brings total recoveries for the NCUA to more than $4.3 billion. Net proceeds from recoveries are used to pay claims against five failed corporate credit unions, including those of the Temporary Corporate Credit Union Stabilization Fund (TCCUSF).
Last week, NCUA reported that the midpoint of the expected rebates from the corporate stabilization fund had risen to $3.2 billion in June from $2.4 billion as of December 2015.
“The RBS settlement raises the midpoint to around $4 billion, approaching the $4.4 billion credit unions paid in assessments,” said Bill Hampel, CUNA chief policy officer. “Economic conditions and successful legal actions have improved the status of TCCUSF, however, credit unions are still unlikely to see any assessment refunds or capital replenishment before 2021.”
The settlement with RBS covers claims asserted in 2011 by the NCUA board as liquidating agent for Western Corporate FCU and U.S. Central FCU in federal district courts in California and Kansas, respectively. NCUA will dismiss its pending suits against RBS, and RBS does not admit fault as part of the agreement. In 2015, NCUA accepted an offer of judgment from the bank for $129.6 million to resolve similar claims relating to securities sales to Members United and Southwest corporate credit unions.
NCUA board Chair Rick Metsger said the board “fully intends to stay the course in fulfilling its statutory responsibilities to protect the credit union system and to pursue recoveries against financial firms that we maintain contributed to the corporate crisis.”