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Michigan Credit Union League Home » Information Services » Publications » News Articles  

Adams: NCUA Is Right to Consider Lowering NCUSIF Reserve   (Misc News: June 22, 2011)

MCUL & Affiliates CEO David Adams joined CUNA in praising comments by NCUA board member Gigi Hyland, who suggested at Friday’s NCUA board meeting that the board should consider lowering reserve levels for the National Credit Union Share Insurance Fund.

The result could be lower assessments to pay for the agency's Temporary Corporate Credit Union Stabilization Fund, set up to pay for the NCUA’s conservation and liquidation of five failed corporate credit unions.

Adams has been pushing for the NCUA to allow reductions in the NCUSIF to ease the pain of assessments to pay for the TCCUSF.

“I find it reassuring that the NCUA is now realizing that the current NCUSIF reserve level is adequate and that a regular NCUSIF premium may not be necessary this year,” Adams said. “I echo CUNA’s call for the agency to use any excess NCUSIF reserves to reduce the TCCUSF assessments.

“The MCUL has twice previously called upon the NCUA board to take action to reduce these deposit insurance fund costs. Doing so would strengthen credit unions’ ability to lend and serve their members in this difficult economic climate.”

The NCUSIF reserves currently stand at $1.2 billion. The NCUA's Office of Examination and Insurance is currently analyzing the NCUSIF's reserve levels. The office plans to complete that analysis by the end of June, according to CUNA News Now.

In a Dec. 7, 2010, letter, Adams wrote that the NCUA should follow the FDIC’s lead and allow the NCUSIF equity level to fall to help ease the burden of the assessments to pay for MBS failures.

“With respect to this issue, I remind you of a previous letter I sent to the NCUA Board strongly suggesting it do what it can to spread out these NCUSIF- and TCCUSF-related costs to include extending the Treasury payback timeframe (which has occurred) and to include some consideration for allowing the NCUSIF equity level to be maintained at an acceptable lower level for a certain period of time, much like the FDIC has done,” Adams wrote in the December letter.

Adams reinforced his argument in a Feb. 18 letter to the NCUA:

“I feel strongly that the reserve level should be allowed to fall to a reasonable level, as low as 1 percent, or even lower, in order to avoid the high insurance premiums and corporate stabilization assessments that are putting such financial strain on credit unions. If the NCUA wants to help stimulate the economy, while applying some prudence in safeguarding the NCUSIF, quick action is needed to reduce this cost burden on credit unions so they can lend more to their 92 million members and small business owners.”

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