The NCUA board Thursday unanimously approved a request for comment on a proposed plan to close the Temporary Corporate Credit Union Stabilization Fund this year, 4 years ahead of schedule. The proposed plan would provide credit unions with a National Credit Union Share Insurance Fund distribution in 2018, estimated to be between $600 million and $800 million.
“We’re reviewing the details of NCUA’s plan for closing the corporate stabilization fund and the mechanisms for providing credit unions these assessments in 2018,” said CUNA President/CEO Jim Nussle. “While we have some initial concerns about an increased operating level, CUNA, leagues and credit unions appreciate Chairman McWatters' efforts on this front and we’ll work closely with the agency on this matter.”
The proposed plan includes a staff recommendation that the stabilization fund closure be done Oct. 1, using the closing balances as of Sept. 30.
If the stabilization fund is closed, there would be remaining obligations of the Corporate Resolution Program. Those, the board believes, can be prudently borne by the share insurance fund without inordinate risk, provided the necessary equity is maintained.
To maintain the necessary equity, the board proposed increasing the normal operating level for the share insurance fund to 1.39%. The agency projects that closing the stabilization fund and transferring assets to the NCUSIF would raise the fund’s equity ratio as high as 1.47%, which would require a distribution to credit unions.
According to NCUA, raising the normal operating level still would allow for a distribution to credit unions in 2018, and also to allow the fund to withstand a moderate recession without the equity ratio dropping below 1.20%.
A ratio below 1.20% requires the agency to charge a premium or develop a fund restoration plan by federal law.
A proposed rule issued by NCUA at the meeting would amend the existing share insurance requirements rule to give federally insured credit unions greater transparency on how an individual credit union’s share of an equity distribution would be calculated.
The proposed rule would also: