ARLINGTON, Va.—A new analysis suggests no premium assessment will be necessary for the National Credit Union Share Insurance Fund in 2016, according to NAFCU, which conducted the study.
But that same analysis also urges the agency to further discuss how the NCUSIF might be affected by several factors, including taxi medallion loans held by credit unions.
The forecast was included in a letter to Board Chairman Rick Metsger and Board Member J. Mark McWatters that was authored by NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt. She also urged the agency to set an estimated premium range for 2017 comparable to the range for 2016, which was zero to six basis points.
A report from NAFCU Chief Economist and Director of Research Curt Long and his research team predicts the NCUSIF’s equity ratio will remain above 1.2% in 2016. Under the Federal Credit Union Act, NCUA is required to charge a premium or establish a restoration plan if the fund dips below 1.2%. The report forecasts the equity ratio under base-level, optimistic and pessimistic conditions and finds that assessments would not be necessary under any of the scenarios. Currently the NCUSIF operating level is set at 1.3%.
“Under base-level and optimistic predictions for 2017, the need for an assessment will be well-avoided,” Hunt wrote. “Only under economic conditions mirroring the last economic recession, an extremely low-probability event at this point, would the share insurance equity ratio fall below the 1.2% threshold. Therefore, NAFCU believes the premium range should be maintained at the current range of zero to six basis points for 2017.”
Hunt also recommended that NCUA exercise caution in setting the normal operating level for the ratio in order to avoid unnecessarily charging a premium to credit unions.
Recalling NCUA’s past recommendations to remove the 1.5% equity ratio ceiling, Hunt also recommended that the agency focus on fraud prevention instead; she noted that fraud has been present in 10 out of 11 credit union failures this year.
Finally, she suggested that NCUA hold a board briefing this year on how the ratio might be affected by taxi medallions, the interest rate environment, insured share growth and other factors.