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IMarketWatchI CU industry overall healthy
WASHINGTON (10/18/10)--The credit union industry overall is “healthy and has strong prospects,” as the National Credit Union Administration (NCUA) commences to sell off legacy assets securities from three corporate credit unions in conservatorship, according to a Thursday MarketWatch article. “NCUA Chairman Debbie Matz estimates that retail credit unions will have to pay between $7 billion and $9.2 billion into a stabilization fund to cover the losses from the wholesale credit unions,” wrote Ronald D. Orol, in an article titled “Credit unions mostly safe despite rescue: analysts.” “However, regulatory onlookers contend that it is unlikely these costs will translate into a major headache for retail credit unions, which number about 7,600, or significant new costs for their customers,” Orol added. He noted that retail credit unions were restricted from purchasing the kind of risky mortgage securities that helped fuel the financial crisis “and have fared fairly well.” Retail credit unions will only experience a minor impact due to problems encountered by corporate credit unions, Greg McBride, an analyst with, said in the article. An analysis of the credit union industry indicates substantial improvement between December 2009 and June, Jonathan Vande Streek, a financial analyst at Austin, Texas-based Highline Financial LLC, which studies the banking industry, told Marketwatch. “Our analysis showed that in December credit unions mirrored what banks were going through, but since then, the situation has improved significantly for credit unions,” he said. “Credit unions have experienced a significant improvement in March and June.” The number of credit unions at “an extreme risk of failure” dropped to 99 from 197, based on a Highline analysis, the article said. The number of “troubled” credit unions fell to 423 from 876. Highline publishes solvency ratings on banks, savings and loan institutions and credit unions. The ratings measure capital adequacy, asset quality, earnings and liquidity, MarketWatch said. “The credit union industry is generally healthy and it is healthier than banks by a large margin. You are seeing the limit of credit union exposure to the subprime debacle,” Jeffrey Pilcher, a former credit union industry consultant, said in the article. Also, in a video interview with Orol, Matz said NCUA’s action is not a bailout and will be largely invisible to consumers because credit unions have the capital to absorb the losses. She also explained why the corporates had securities in the portfolio that went bad (they were triple-A rated at the time of purchase) and how NCUA’s new corporate rule will prevent a recurrence. To read the article and view the video interview with Matz, use the link.
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