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Summary of NCUA Corporate Stabilization Fund Implementation Letter to Credit Unions

NCUA Letter to Credit Unions 09-CU-14 provides guidance regarding the implementation of the Corporate Stabilization Fund and its impact on federally-insured credit unions’ balance sheets. As a result of the Corporate Stabilization Fund, credit unions’ 0.69 percent of insured shares NCUSIF deposit impairment will be “passed-back” and credited to each credit union’s NCUSIF deposit account as a recapitalized NCUSIF deposit. Credit unions will not “reverse” the NCUSIF deposit impairment they recorded in December 2008 or March 2009; rather the “passed-back” money will count as “income” to each credit union and be reflected on June 30, 2009 call reports. The previously announced NCUSIF premium of 0.30 percent of insured shares (up to $100,000 per account) will be reduced to 0.15 percent of insured shares (up to $250,000 per account).

The Letter to Credit Unions states that credit unions’ PCA obligations “will not change as a result of the stabilization expense entries made in either December 31, 2008 or March 31, 2009.” Credit unions with a net worth between 6 and 6.99 percent may apply for waivers of earnings retention requirements if the corporate credit union expenses were the reason that the credit union’s net worth fell below 7 percent, and the credit union’s net worth will be above 7 percent on its June 30, 2009 call report (i.e. after implementation of the Corporate Stabilization Fund). Similarly, NCUA "will be receptive to approving" pro forma net worth restoration plans for credit unions that have a net worth below 6 percent as a result of the corporate credit union expenses if the credit union's net worth will be above 6 percent after implementation of the Corporate Stabilization Fund.

To reflect the temporary (until 2013) increase in NCUSIF insurance coverage from $100,000 to $250,000, credit unions with $50 million or more in assets will receive their normal, semi-annual NCUSIF capitalization deposit adjustment notice in the fall, based on June 30, 2009 call report data. Credit unions with less than $50 million in assets will receive their adjustment notices in spring 2010.

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