The National Credit Union Administration (NCUA) Office of the Inspector General (OIG) determined that NCUA's process and basis for setting the Normal Operating Level (NOL) at 1.39 percent was reasonable.
The OIG was responding to a request from Callahan & Associates regarding the legality of transferring the funds of the Temporary Corporate Credit Union Stabilization Fund to the National Credit Union Share Insurance Fund (NCUSIF) and increasing the NOL of the NCUSIF from 1.30 percent to 1.39 percent.
The OIG limited its analysis to raising the NOL from 1.30 percent to 1.39 percent. The OIG stated that it was beyond its purview "to conduct a legal review of the Board's statutory authority."
The OIG reviewed applicable legislation and rationale for increasing the NOL to 1.39 percent. In addition, the OIG compared NCUA's rationale for increasing the NOL with the Federal Deposit Insurance Corporation's rationale for raising the Designated Reserve Ratio for the Deposit Insurance Fund in 2011.
The OIG pointed out that the decision to raise the NOL to 1.39 percent was to preserve public confidence in the NCUSIF, to prevent an impairment in credit unions' one percent NCUSIF capitalization deposit, and to ensure the NCUSIF can withstand a moderate recession without the equity ratio falling below 1.20 percent over a five-year period.
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Maybe to preserve public confidence in the ncusif 1%, they should have the credit unions write down the 1% in their net worth so that the ncusif owns it free and clear. If they do that and raise the reserve level to 2% like fdic, then it would be solid. We’ve wondered at our credit union why this hasn’t happened yet...but we aren’t complaining.
ReplyDeletewhat is the FDIC ratio? what is the better insurance FDIC or NCUSIF? what insurance is better managed? what insurance is most problematic with "at risk" financial institutions?
ReplyDeleteDr. Leggett should reply but there is ZERO comparison between the two.
DeleteThe FDIC reserve ratio was 1.28 percent as of September 2017.
DeleteNo insured deposit in the NCUSIF and FDIC has ever lost a penny.
Problem assets in FDIC-insured banks were $16 billion as of September 2017. Problem assets in credit unions were $10.2 billion. However, the banking industry had $17.2 trillion in assets, while credit unions had almost $1.4 trillion in assets.
Zero comparison.
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