The NCUA will receive $1.1 billion to settle claims against the Royal Bank of Scotland, with the money going to pay claims against five corporate credit unions, including those of the Temporary Corporate Credit Union Stabilization Fund, agency officials said.
The claims are in connection with the sale of faulty mortgage-backed securities to two corporate credit unions. Once the payment is made, NCUA's recoveries from various financial institutions will reach $4.3 billion.
The NCUA was the first financial regulator to recover losses from investments in these securities on behalf of failed financial institutions.
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The agency uses the net proceeds from settlements to repay the stabilization fund's outstanding borrowings from the U.S. Treasury and to decrease the amount that surviving credit unions must pay to recoup the losses of the corporate credit union system.
"NCUA is pleased with today's settlement and fully intends to stay the course in fulfilling its statutory responsibilities to protect the credit union system and to pursue recoveries against financial firms that we maintain contributed to the corporate crisis," NCUA Board Chairman Rick Metsger said.
The settlement covers claims by the NCUA as liquidation agent for Western Corporate Federal Credit Union and U.S. Central Federal Credit Union. As part of the settlement, the NCUA will ask that suits against the Scottish bank be dismissed, while the bank does not have to admit any fault.
NCUA still has litigation pending against other financial institutions, including Credit Suisse and UBS Securities, as well as against residential mortgage-backed securities trustees and LIBOR banks.
Credit union trade groups said they will keep close watch on how the funds recovered are used.
"NAFCU will continue to urge the agency to pursue its diligent legal recovery efforts and to be fully transparent in how and when the funds recovered will be refunded to credit unions," said President/CEO B. Dan Berger.
"Economic conditions and successful legal actions have improved the status of TCCUSF, however, credit unions are still unlikely to see any assessment refunds or capital replenishment before 2021," said Bill Hampel, CUNA's chief policy officer.
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