NCUA Assesses 25 bp for Corporate Stabilization Fund (Misc News: August 31, 2011)
The NCUA board this week set the 2011 Corporate Stabilization Fund assessment at 25 basis points. Additionally, it said that there would be no 2011 Share Insurance Fund premium this year.
The assessment is expected to raise $1.96 billion and will be the largest assessment ever charged to federally insured credit unions, according the CU Journal. Funds generated from the 2011 assessment, along with borrowed funds from the U.S. Treasury, will pay the principal and interest on maturing Medium Term Notes issued by corporate credit unions and guaranteed by the Stabilization Fund, and the guaranteed notes issued to the bridge corporate credit unions.
The board said it took into consideration the potential negative impact of this assessment on credit union earnings by annualizing June 30 Call Report figures, which is required by law.
NCUA will distribute invoices with the 2011 assessment due by Sept. 27. Credit unions should expense the assessment in September and report the full expense on their Sept. 30 Call Reports.
But there was good news in the assessment announcement.
Larry Fazio, NCUA's director of examination and insurance, told the board that loss projections are now lower than previously thought, according to CU Times.
As of Dec. 31, 2010, remaining losses to the corporate Stabilization Fund had been estimated at between $5 billion and $7.2 billion. But the most current estimate, as of June 30, 2011, projected remaining losses at between $1.9 billion and $6.2 billion. The large spread in the current estimate is due to the country’s recent economic volatility.
CUNA Chief Economist Bill Hampel said NCUA has expressed plans to charge another 12 basis points, or about $1 billion, in 2012, and about $1 billion every year until the end of the corporate program.
The $2 billion assessment topped last year’s $1 billion and 2009’s $337 million corporate charges, and NCUSIF premiums of about $1 billion in each of the last two years.
“What that means,” Hampel told Credit Union Journal, “is that [average credit union] ROA this year, which was running around 85 to 90 basis points, will be knocked down to the neighborhood of 70 basis points.”