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Update on Projected Corporate Stabilization Fund Assessments

The most important implication for credit unions of the new Temporary Corporate Credit Union Stabilization Fund (TCCUSF) financial statements, combined with the updated information posted June 29 by the National Credit Union Administration (NCUA) on its website on Corporate System Resolution Costs, is what it says about the likely remaining assessments for that fund, said Credit Union National Association (CUNA) Chief Economist Bill Hampel in a recent analysis.

NCUA received a clean audit of its corporate stabilization fund last week (News Now June 25). And, as promised when announcing the clean audit, the NCUA posted on June 29 an update to its corporate system resolution loss projections through year-end 2011.

Hampel said that after analyzing both sets of information, he believes that the NCUA used “an abundance of caution” in developing the audited financial statements, which offered a negative net position of $5.3 billion as of December 2011 as the latest estimate of the amount to be paid in future stabilization assessments. 

In reviewing all the information, Hampel said, the negative net position is 80% of the way to the top of the projected loss range predicted at $2.7 billion to $6 billion.

He said that because the negative net position is at the high end of the range, it appears to be a “very-unlikely-to-be-exceeded” number rather than a “most-likely-to-be assessed” number.

“Assuming that the various outcomes are distributed fairly evenly around the $4.4 billion mid-point of the range, this suggests that the remaining assessments to credit unions will total about $4.4 billion rather than $5.3 billion.

“That would reduce by one the number of years remaining of roughly 10 basis point assessments to four to five,” Hampel said. Hampel reminded that the loss estimates are just that-- educated predictions. “The fact that the U.S. housing market has been improving over the past few months suggests the ultimate losses could be lower.”

The NCUA has told CUNA that this year’s assessment will be on the agenda for its board meeting on July 24. --  NewsNow