ALEXANDRIA, Va. (3/18/15)--The upper and lower ends of the projected Temporary Corporate Credit Union Stabilization Fund assessment range remain negative, from a negative $2.5 billion to a negative $700 million, the National Credit Union Administration announced Tuesday.
According to the agency, as long as both ends of the range remain negative, it is unlikely credit unions will be charged future stabilization fund assessments.
The announcement came as part of a release of updated information about the costs of the NCUA's Corporate Resolution Program and the performance of the agency's Guaranteed Notes Program. Credit unions have paid $4.8 billion in assessments since the creation of the stabilization fund in 2009. The fund is scheduled to expire in 2021.
"The good news is that the assessment range became even more negative over the latest six-month reporting period" said Bill Hampel, CUNA's Chief Policy Officer. "From the second to the fourth quarter of 2014, the mid-point of the assessment range 'fell' from negative $1.2 billion to negative $1.6 billion, an improvement of $400 million. Since a negative assessment is a likely future rebate, this is positive news: it means the expected size of future rebates has increased. However, it will likely be several years before any rebate is paid to credit unions."
According to the NCUA, it is still obligated to repay $2.6 billion in outstanding borrowings from the U.S. Treasury. Principal and interest on the NCUA Guaranteed Notes, as well as other obligations of the stabilization fund, also must be fully repaid before NCUA can distribute any remaining funds to credit unions.
"These debts will be paid with proceeds from the legacy assets from the closed corporates" said Hampel. "Funds left over after paying these obligations will be the source of rebates."
The NCUA has pending litigation against several Wall Street firms, seeking recoveries on faulty securities purchased by the failed corporate credit unions as well as separate litigation alleging violations of federal and state anti-trust laws by manipulation of interest rates in the London Interbank Offered Rate system.
The agency is also pursuing or participating in repurchase actions and litigation against trustees. Net recoveries from this litigation will help reduce the assessments credit unions will need to pay over time.