The National Credit Union Administration (NCUA) Board last week approved a series of actions designed to enhance and support a corporate credit union system facing unprecedented strains on liquidity and capital due to extraordinary market disruptions and the current economic climate. Corporate credit unions provide investment and liquidity services to consumer-owned natural person credit unions.
Through these actions, natural person credit union members are provided important safeguards by drawing upon the significant aggregate levels of capital already within the credit union system.
NCUA is acting to add stability to and strengthen corporate credit unions, utilizing a three-pronged approach designed to maintain liquidity, strengthen capital and restructure the corporate system.
Using all available resources to achieve these objectives, the NCUA Board approved the following:
- to guarantee uninsured shares at all corporate credit unions through February 2009, and establish a voluntary guarantee program for uninsured shares of all corporate credit unions through Dec. 31, 2010;
- to issue a $1 billion capital note to U.S. Central Corporate Federal Credit Union (U.S. Central);
- to issue an Advance Notice of Public Rulemaking (ANPR) on restructuring the corporate credit union system; and
- to declare a premium assessment to restore the National Credit Union Share Insurance Fund (NCUSIF) equity ratio to 1.30%, which will be collected in 2009.
The $1 billion injection into U.S. Central provides reserves to offset anticipated realized losses on some of the mortgage- and asset-based securities held by U.S. Central, the NCUA Board says. Beginning in 2007, NCUA implemented supervisory actions for affected corporate credit unions to restrict purchases of mortgage-related securities, restrict terms of investments to not exceed four months, establish commercial paper and medium-term note programs, and acquire third-party stress test modeling of their mortgage related securities.
The ANPR issued by the board, with a 60-day comment period, includes the entire range of areas of potential reform and restructuring related to the Corporate Credit Union system. Simultaneously issuing the ANPR with the announcement of the guarantee program demonstrates NCUA's commitment to reform the system and achieve proper accountability, the group says.
Documents relating to the board actions concerning NCUA's Corporate Stabilization Program are available online at www.ncua.gov.
"The corporate credit union system [has been] an integral part of the credit union industry for over three decades, and has enabled credit unions to better provide services to almost 90 million consumers," notes NCUA Chairman Michael Fryzel. "I call upon the credit union industry to work with NCUA in this important cooperative effort, and remain confident of our ultimate success in creating a more viable and stable corporate network."