Compliance Blog

Posted by Steve Van Beek

On Friday evening, NCUA placed U.S. Central Corporate FCU and Western Corporate FCU into conservatorship.  NCUA indicates that operation of both corporate credit unions will continue uninterrupted.  NCUA issued a press release that contains information on the most recent actions to stabilize the corporate credit union system.

NCUA also issued Letter to Credit Unions 09-CU-06 which addresses the conservatorship and contains updated estimates for the NCUSIF impairment.  In short, NCUA's continued analysis resulted in an assumption of a $5.9 billion reserve level, up from $4.7 billion estimated on January 28, 2009.  NCUA calculates that this additional $1.2 billion will result in a further 10 basis point reduction of earnings and 9 basis points of net worth on average.  NCUA also included this information:

"If your credit union has already reflected the stabilization expense on the financial statements, the accounts will need to be adjusted for the increase in the NCUSIF’s recorded liability estimate. The individual expense for the stabilization action should be calculated based on insured shares of $100,000 in two parts:

1) Multiply insured shares as of December 31, 2008, by 0.30% to arrive at the projected premium expense.

2) Multiply insured shares as of December 31, 2008, by 1% to arrive at the NCUSIF Deposit. Multiply the NCUSIF Deposit by 69% percent to arrive at the revised impairment expense. Previously, this was estimated at 51% of the deposit.

Refer to Accounting Bulletin 09-1 issued in February 2009 for more details."  (emphasis in original).

***

To help explain its most recent actions, NCUA will host a webcast TODAY, March 23 at 2:00 p.m., EST.  You can find the registration link by clicking on the link above or going directly to the registration site here.  Registration closes at 1:45 p.m., so be sure to get signed up right away.

My suggestion would be to try and get through NCUA's Letter to Credit Union before settling in for the webcast as the letter gives the general background for NCUA's actions and how they will impact the NCUSIF and, ultimately, natural person credit unions.