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March 23, 2009 - The National Credit Union Administration (NCUA) placed two federal corporate credit unions under conservatorship on March 20, U.S. Central Corporate Federal Credit Union (US Central), Lenexa, Kan., and Western Corporate Federal Credit Union (WesCorp), San Dimas, Calif., to resolve balance sheet issues stemming from deteriorated mortgage and asset backed securities.
NCUA notified state regulators and federally insured credit unions (FICUs) about the actions stating that a stress test and detailed analysis of mortgage and asset backed securities in the two corporates showed an unacceptable high concentration of risk. Before the PIMCO study was completed, the NCUA estimated that the National Credit Union Share Insurance Fund (NCUSIF) required a reserve of $4.7 billion to stabilize the corporate system; the estimate is now up to $5.9 billion. Operations at the two corporate credit unions will not be affected by the conservatorship, said NCUA. U.S. Central holds $34 billion in assets and WesCorp has approximately $23 billion in assets.
Both corporates are participating in the NCUA Share Guarantee Program which will insure natural-person credit union funds in U.S. Central and WesCorp through December 2010. In a statement, NCUA Chairman Michael Fryzel assured consumers that funds in natural-person credit unions remain safe. He also said that the remaining corporate credit unions were in good condition and that similar intervention was not likely.
“NASCUS, state regulators and NCUA plan to meet this week on several occasions to discuss the impact of the conservatorship actions on the credit union system,” said NASCUS President and CEO Mary Martha Fortney. “State regulators will continue their active dialogue with the federal regulator to ensure all regulatory options are carefully considered and actions coordinated in the most efficient manner.”
A letter to credit unions was sent to federally insured credit unions notifying them of the actions. The letter can be downloaded here. NASCUS will keep you updated as news develops. To access more information and resources on corporate stabilization efforts, click here.
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