NCUA Proposes Voluntary Prepayment of Future Corporate Stabilization Fund Program Assessments

May 19, 2011 - The National Credit Union Administration (NCUA) proposed a program that would allow credit unions to voluntarily pre pay for future corporate stabilization fund assessments up to 36 basis points.

At the request of credit unions, the NCUA developed a proposed program and is seeking public comment.  When the Temporary Corporate Credit Union Stabilization Fund (Stabilization Fund) was established in 2009, NCUA communicated to the credit union system that significant upfront cash outlays would be expected in 2011 and 2012.

After taking into account all factors, the Stabilization Fund cash flow projections indicate a total of $8.44 billion in cash outlays that will need to be funded through October 2012.  NCUA’s Treasury borrowing authority will cover $6 billion of that need, leaving $2.94 billion in necessary additional funding that will come from credit union assessments.

Knowing that $2.94 billion will be needed, NCUA estimates currently a 20 - 25 basis point assessment for 2011 and a 13 basis point assessment for 2012.  NCUA is proposing developing a program by which credit unions could voluntarily pre-pay future assessments this year. The prepayments would be applied to the participant credit union’s assessments issued beginning in 2013. However, substantial credit union participation in the program would likely allow NCUA to reduce the overall basis point assessments this year and next.

The proposed prepayment program would allow credit unions to pre pay up to 36 basis points of insured shares (as of 3/31/11) with a minimum advance of $10,000.  The interest rate on the advance would be zero, and would be considered low risk for calculating net worth. In order for the program to proceed, a minimum of $300 million of advance assessments is necessary from credit unions.  The NCUA estimates that more than 80 percent of credit unions would be eligible for the program based on their asset size.

To read more about the program, click here. NCUA is encouraging the credit union system to provide feedback on the program by June 20, 2011.