The National Credit Union Administration (NCUA) assumed control of three undercapitalized corporate credit unions, announced a plan to isolate impaired assets in the corporate credit union system, and finalized a set of stronger regulations as part of its efforts to resolve the financial challenges facing corporate credit unions without disrupting consumer service.
“The steps NCUA has taken represent a comprehensive solution to the problems afflicting the corporate credit union system,” said NCUA Chairman Debbie Matz. “Just as important, this plan puts consumers first and ensures that there will be no loss to taxpayers.
“This plan also provides an orderly transition to a new regulatory regime for corporates. In addition, we are affording local credit unions greater choice in selection of their liquidity and back office provider.”
The Temporary Corporate Credit Union Share Guarantee Program remains in effect for the entire corporate system through Dec. 31, 2012. In addition, the agency continues to insure credit union and consumer deposits up to $250,000 per account.
NCUA says setting the plan into motion required conservatorship today of three additional corporate credit unions: Members United Corporate Federal Credit Union Warrenville, Ill.; Southwest Corporate Federal Credit Union, Plano, Texas; and Constitution Corporate Federal Credit Union, Wallingford, Conn.
In 2009, U.S. Central Corporate Federal Credit Union, Lenexa, Kan., and Western Corporate Federal Credit Union, San Dimas, Calif., were placed into conservatorship.
NCUA’s plan to address the impaired assets and resolve these troubled institutions involves several steps:
NCUA consulted with the Treasury Department, Federal Reserve, and other federal financial regulators in developing these plans.
In particular, the life of the Temporary Corporate Credit Union Stabilization Fund has been extended to June 30, 2021. This will give the NCUA Board flexibility in mitigating the impact of the annual assessments to credit unions for the costs over this period.
Costs will be borne exclusively by the credit union industry and will not result in any loss to taxpayers.
New regulatory reforms
NCUA adopted a new set of regulatory reforms aimed at strengthening the corporate credit union system. The new corporate regulation (NCUA Rules and Regulations, Part 704):
“NCUA’s action to deal with the troubled institutions and the impaired securities on the corporates’ books—together with reforms to the NCUA regulation that governs the corporate system—will create stronger safeguards for the nation’s entire credit union system,” Matz said.
“The leaders of the nation’s consumer credit unions must make the strategic business decisions about whether to recapitalize some of the remaining viable corporates, switch to a different corporate, or seek services at some other type of institution,” she added. “NCUA is confident that the new framework will enable the choices ahead to be made in the context of strong and safe credit union operations. The credit union industry, and the 90 million consumers it serves, deserve nothing less.”
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