By Ray Birch
ALEXANDRIA, Va.—While credit unions are pleased they will likely see a refund in 2018 from funds paid a decade ago to prop up the corporate system, some CEOs are not smiling after NCUA announced a proposed hike in the NCUSIF normal operating level to account for the risk to fund from the soon-to-be-included stabilization fund assets.
As CUToday.info reported, the NCUA board has indicated that between $600-million and $800-million could be returned to credit unions next year as the Temporary Corporate Credit Union Stabilization Fund winds down a decade after the financial crisis.
At its July 20 board meeting, the agency approved a proposal to close the Share Insurance Fund in October of 2017. Should the stabilization fund be closed this year, remaining legacy assets will be transferred to the Share Insurance Fund, from which NCUA can then make distributions.
But at that board meeting the agency was clear that an increase in the normal operating level of the NCUSIF—moving to 1.39% from 1.30%—is needed to account for the NCUSIF bearing the legacy assets.
Opposed To NCUA Decision
Ronald Westad, CEO at the $1.5-billion Arizona FCU in Phoenix, is opposed to that decision.
“The TCCUSF was always separate from the NCUSIF and we paid two separate assessments. It appears NCUA may be advocating for an increase in the operating level in order to retain some of our over-funding of the stabilization fund,” he said. “Credit unions should receive the full amount of the over-funding back. No reasonable arguments could be made otherwise.”
Evan Clark, DOCFCU
Bernie McLaughlin, CEO of the $766-million Point Breeze CU in Hunt Valley, Md., has concerns, as well.
“Our concern here is that raising the level to 1.39% from 1.30% would be ‘hard-coded’ for all future years,” he said. “Merging the Stabilization fund with the insurance fund makes the higher fees palatable right now. But what about future assessments in future years after the merged funds are used up? A higher operating level may possibly be an unnecessary burden for our industry. Again, we should be very cautious about our industry’s long-term financial health.”
Good Idea
But Evan Clark, CEO at the $439-million Department of Commerce FCU in Washington thinks the operating level increase, for now, is a good idea.
“I think the hike in the operating level is prudent until the corporate mess is completely cleaned up and behind us. I hope NCUA remembers to scale it back once this is behind us,” said Clark.