Thursday, July 25, 2013

Stabilization Fund Assessment at 8 Basis Points

NCUA announced that federally-insured credit unions will be assessed 8 basis points on insured deposits (shares) as of June 30, 2013. The assessment will raise approximately $700.9 million.

Federally-insured credit unions should expense the assessment in July and report the entire expense on the September 30, 2013 Call Report.

According to staff analysis, an assessment of 8 basis points will lower the annualized return on assets for federally-insured credit unions by 7 basis points. Based upon March 2013 data, an additional 328 federally-insured credit unions will slip from being profitable to having a negative core income.

In addition, NCUA stated that Net Worth Ratio for the industry will fall 6 basis points from 10.31 percent to 10.25 percent. Eight credit unions will become undercapitalized as their net worth ratio will fall below 6 percent due to the assessment and another 31 federally-insured credit unions will slip from being well-capitalized to adequately capitalized.

Furthermore, NCUA stated that the assessment of approximately $700.9 million will bring total Temporary Corporate Credit Union Stabilization Fund (TCCUSF) assessments to $4.8 billion. NCUA is projecting that the remaining TCCUSF assessments will range from $0.9 billion to $3.2 billion.

NCUA further announced that it will repay at least $650 million in TCCUSF borrowings in November. This will leave outstanding borrowings to Treasury at no more than $4.075 billion.

Read the board action item.

3 comments:

  1. If credit unions owe treasury $4.075 billion, how can the remaining assessment range have a high end of $3 billion?

    The math NCUA projects on their website has NEVER worked.
    NCUA has a market value of a (negative) 9billion on the remaining legacy assets...again how does the top end =(just) $3billion?

    In 2012, NCUA data says there was $2billion in losses on CCU bonds but only $1billion was covered thru assessment +lawsuit recovery+absconding funds from ncusif...so, if the future assessment are so low....who is paying the difference so credit unions don't have to?

    Mr. Leggett, do you have an answer..or do you just report what NCUA says like the cu trades and cu papers?

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  2. You are forgetting about the transfers from the NCUSIF. As long as the TCCUSF has outstanding borrowings from Treasury, the NCUSIF must transfer the amount in excess of 1.30 percent reserve ratio to TCCUSF. In the last two years, that amount has been in excess of $300 million per year. It is likely that NCUA is factoring in these transfers in determining future assessments. This probably explains part of the discrepancy between future assessments and the amount owed; but not all.

    I do agree with you that NCUA lacks transparency regarding how it derived its projections on corporate losses.

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  3. You are forgetting that on NCUA web site it also shows that the AME "owes" the tccusf $8 billion but tccusf books seem to imply that it expects to only get about $1.5 billion. What does that imply?
    These numbers and the market value NCUA has placed on the bonds just don't correlate to the projected assessment...not even close...and the ncusif won't be able to transfer THAT much unless credit unions are assessed ALOT more...right!

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