NASCUS Encourages NCUA to Ensure Prudent Participation in Corporate Prepayment Program
June 20, 2011 - NASCUS provided feedback to the National Credit Union Administration (NCUA) on its potential program to allow credit unions to prepay some of its future corporate stabilization payments during 2011.
NCUA has proposed a potential Voluntary Prepaid Assessments Program by which some credit unions may choose to voluntarily prepay future assessments up to 36 basis points. When the Temporary Corporate Credit Union 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. The funds collected from a potential prepayment program would address some of the cash outlay issues and potentially lower the assessment rates for this year and next, while allowing credit unions to prepay for assessments starting in 2013.
Whether NCUA offers a program, and whether credit unions choose to participate, are issues primarily between NCUA and federally insured credit unions, wrote NASCUS in its June 20 letter. NASCUS’ comments are confined to ensuring that a credit union’s decision to participate is a prudent one given its particular condition and recommends the agency add a safety and soundness threshold for participation.
“If NCUA proceeds with a prepaid assessment program, state regulators will work to ensure participation of state-chartered credit unions is prudent in light of the credit unions’ condition. The addition of safety and soundness thresholds would mitigate the risk of imprudent credit union participation,” stated NASCUS.
Such an approach would be consistent with regulatory expectations of a troubled institution that was seeking to pre-pay or expend up to 36 basis points on something other than the stabilization fund, added NASCUS.To view our full letter, follow this link.