Tuesday, August 28, 2012

Fact Checking NCUA Video

Last week, NCUA's Chief Economist John Worth released a video comparing anticipated future Temporary Corporate Credit Union Stabilization Fund (TCCUSF) assessments for credit unions to anticipated Deposit Insurance Fund (DIF) assessments by the Federal Deposit Insurance Corporation (FDIC).

According to Worth, federally-insured credit unions can expect to pay less in assessments than federally insured banks during the next decade.

However, there are several problems with this NCUA video.

First, the video only compares future assessments for the TCCUSF versus the DIF. The video does not include any projected future assessments to the National Credit Union Share Insurance Fund (NCUSIF). To do a true apples to apples comparison, Worth should have included any NCUSIF assessments along with TCCUSF assessments to determine future assessments paid by credit unions.

Perhaps Worth is assuming future assessments by the NCUSIF will be zero. If so, he should make this assumption explicitly clear.

To form your own expectations about future NCUSIF assessments, there were 399 federally-insured credit unions on the problem credit union list at the end of the second quarter 2012. These credit unions held approximately $30 billion in assets.

Second, it is unclear whether Worth's analysis about future assessments include $5.7 billion in assets set aside to pay claims under the FDIC’s Temporary Liquidity Guaranty Program, which expires at the end of this year. It is expected that these assets, while be transferred to the DIF at the end of this year. If the analysis did not include this transfer, then the amount of future DIF assessments will be lower.

Third, Worth correctly points out that the minimum reserve ratio for the DIF is 1.35 percent of insured deposits. The Dodd-Frank Act raised the minimum reserve ratio for the DIF from 1.15 percent to 1.35 percent. However, the Dodd-Frank Act stated that in setting the assessments necessary to meet the new minimum reserve ratio requirement, the FDIC shall offset the effect raising the minimum reserve ratio from 1.15 percent to 1.35 percent on insured depository institutions with total consolidated assets of less than $10 billion. Once again, did Worth's analysis take into account this offset in determining the amount of assessments paid?

Fourth, FDIC assessment rates are risk-based, while NCUA assesses a flat rate to all federally-insured credit unions. The video does not make it clear as to what FDIC assessment rate is being applied in its analysis. Therefore, NCUA may be overstating the amount of DIF assessments a credit union might pay.

These concerns should caste doubts about the video's conclusion that future assessments will be less for federally-insured credit unions compared FDIC-insured banks.


  1. Keith, thank you for putting these clarifications into evidence. It is important as the FDIC may not respond.

  2. 235 views out of 7200 credit unions and their staff, board, vendors and trade associations. Guess no one is listening after the listening tour.
    May need a national brand campaign for NCUA.
    Maybe NCUA should call Cuna for some "got milk" suggestions.
    At this point, is anyone listening to NCUA about anything related to corporates?
    Is anyone listening about-- Nything?

  3. What is the really purpose behind the video?

  4. Anonymous:

    I believe NCUA did the video to dissuade credit unions from seeking to convert to a mutual savings bank charter.

  5. Keith, have you considered the potential exposure that loss sharing arrangements may have upon the deposit insurance funds and possible resulting assessments?



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