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

Voluntary Prepayment Program Falls Short of Minimum   (Misc News: August 3, 2011)

The NCUA did not receive sufficient pledges from credit unions to meet the minimum threshold for triggering the Voluntary Prepayment of Corportate Stabilization Fund Assessment, meaning the program will not launch in 2011.

Of the nation’s nearly 7,300 federally insured credit unions, 799 pledged $369.9 million to voluntarily prepay assessments. In response to requests from credit unions, the NCUA board had determined that the program would not go forward if less than $500 million in pledges were received. Therefore, NCUA will not debit any voluntarily pledged amount from any credit union.

In a story posted on News Now, CUNA President/CEO Bill Cheney, said that a larger program might have been more attractive to credit unions. According to the rules for the program set by the NCUA, funds for the program would have been capped at $500 million, with credit unions that pledged to support the program paying a pro-rated share.

"It's unfortunate that the minimum size of the program could not have been larger, as CUNA had recommended, so that the prepayment would have provided for a greater decrease in this year's assessment," Cheney said.

As an example, he said that if the minimum size had been set at $1 billion, this year's assessment could have been reduced to about 12 basis points.

"Had that been the case, credit unions may well have found that the program would be more attractive, in which case they might have committed substantially more to the program," Cheney said Tuesday. Credit unions that wished to take part in the assessment prepayment plan had to notify the agency of their intent by last Friday.

NCUA board Chair Debbie Matz commented, “NCUA responded to credit union requests and created a viable alternative to offer prepayments as a way to manage assessments in the long run. While the pledges fell short of meeting the required threshold to move forward, the NCUA board remains open, perhaps, to reconsidering this issue next year.”

The NCUA set the $500 million maximum to maintain flexibility and ensure the cash needs and contingency funding necessary for the Stabilization Fund were met. Additionally, based on industry feedback, the board intended to encourage broader credit union participation levels by setting a $500 million threshold.


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