The NCUA said it does not foresee stabilization fund assessments following the regulator’s Thursday posting of updated information on the costs of the Corporate Resolution Program and performance of the NCUA Guaranteed Notes Program.
According to the data, both the upper and lower ends of the projected assessment range for the Temporary Corporate Credit Union Stabilization Fund remained negative, at -$1.6 billion to -$3.2 billion.
As long as both ends of the range remain negative, the agency said it is unlikely it will charge credit unions future stabilization fund assessments.
“Six years ago, projections of possible stabilization fund assessments to credit unions ran as high as $9.2 billion,” NCUA Board Chairman Debbie Matz said. “However, prudent management of the stabilization fund, an improving economy and an effective legal strategy have produced a much better long-term outcome for federally insured credit unions. At present, we do not see a need for further assessments, and we will continue our sound management policies and litigation strategy.”
These projections, Matz said, are subject to change based on the performance of the failed corporates’ legacy assets, future legal recoveries, and economic variables such as interest rates, unemployment and housing costs. The regulator uses BlackRock, an independent securities valuation firm, to project the future performance of the legacy assets in the NCUA Guaranteed Notes Program.
Since the creation of the stabilization fund in 2009, credit unions have paid $4.8 billion in assessments. The stabilization fund is scheduled to close in 2021.
During the NCUA’s March board meeting, Matz said the agency anticipates no funds will be distributed to credit unions until 2021.
The NCUA is still obligated to repay $1.7 billion in outstanding borrowings from the U.S. Treasury. Principal and interest on NCUA guaranteed notes, as well as other obligations of the stabilization fund, must also be fully repaid before the NCUA can distribute any remaining funds to credit unions.
The NCUA also recovered $2.5 billion from the Wall Street firms that sold faulty mortgage-backed securities to the failed corporate credit unions. The NCUA said it is using the net proceeds from these settlements to reduce the costs that federally insured credit unions need to pay for the corporate resolution.
The NCUA has 12 pending law suits related to faulty securities against underwriters, issuers, trustees and various banks, and one suit against various banks that participated in setting the London Interbank Offered Rate.
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