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CUNA audio conference NCUA must explore options
WASHINGTON (2/5/09)—Credit Union National Association (CUNA) President/CEO Dan Mica told participants on an audio conference call Wednesday that while CUNA recognizes federal regulators had no choice but to take action on behalf of the corporate credit unions, CUNA opposes the means chosen to fund the corporate credit union stabilization. Close to 3,000 tuned in for CUNA’s audio conference call on issues surrounding the National Credit union Administration’s (NCUA) corporate credit union aid plan.
Click for slide show CUNA President/CEO Dan Mica opens the more-than-hour-long informational session CUNA offered to affiliated credit unions on issues surrounding the National Credit Union Administration’s corporate credit union assistance plan. Close to 3,000 callers participated. (CUNA Photo)
Mica told particpants that alternative funding approaches must be explored, and underscored CUNA is doing just that. He noted that all members of the NCUA board have encouraged CUNA to developed feasible and legal alternatives. Mica added that CUNA's Corporate Credit Union Task Force has been working on alternatives to recommend to NCUA. The CUNA leader urged credit unions to keep sending their ideas for reasonable alternatives to CUNA at Ncuacorp@cuna.com. He also urged credit unions to respond to NCUA's Advance Notice of Proposed Rulemaking on issues relating to the corporates. Comments are due to NCUA April 6, and CUNA has posted a Regulatory Action Call on its Regulatory Advocacy website. NCUA's Central Liquidity Facility (CLF) President Owen Cole reviewed the actions NCUA has taken leading up to the announcement last week that the agency was providing $1 billion in capital assistance to U.S. Central and establishing a program to guarantee all deposits in all corporates. NCUA Deputy Director Larry Fazio detailed the agency's stabilization actions and addressed the costs to the NCUSIF. He said there will be a $1 billion immediate cost for the capital provided to U.S. Central and $3.7 billion loss revenue for the deposit guarantee, resulting in a replenishment of the 1% deposit and an insurance premium for all federally insured credit unions, under the current funding mechanism. He said about 50% of the NCUSIF deposit will be impaired. He also reiterated that the premium has been declared but won't be billed until later in 2009. Both Fazio and Cole supported the development of funding alternatives for the NCUA Board to consider. Fazio also announced the issuance of the agency's accounting bulletin to provide guidance to credit unions with less than $10 million in assets on how to reflect their costs in funding the assistance to the corporates. Credit union of that size do not have to follow Generally Accepted Accounting Principles. (See related story: NCUA posts accounting info on corporate plan) Scott Waite, CFO of Patelco CU, San Francisco, and chairman of CUNA’s Accounting Task Force, provided details of the accounting treatment for credit unions regarding the insurance costs. He said the accounting guidance from NCUA is "as expected." CUNA SVP of Economics Bill Hampel discussed the costs to credit unions. He said there will be an average ROA reduction of 62 basis points and an average net worth reduction of 56 basis points, although individual results will vary. Hampel added that final expenses to credit unions will depend on the analysis of corporate credit union bonds, which the agency has requested, the probability of their sale before maturity, and the impact of NCUA's stabilization action efforts on the corporate system. The CUNA audio conference also included Terry West, president/CEO of VyStar CU and chairman of CUNA’s Corporate Credit Union Taskforce, Eric Richard, CUNA General Counsel, and Mary Dunn, CUNA Deputy General Counsel. Alternatives CUNA has been considering to date include:
* Encourage and enable capital into corporates from natural person credit unions; * Use more of the CLF; * Expand NCUA's Credit Union System Investment Program;* Facilitate the purchase of corporate credit union assets by natural person credit unions; * Allow corporates to infuse capital into the NCUSIF through capitalization investments; * Continue to address accounting issues, including ones relating to securities that are other-than-temporarily-impaired; and * Access TARP funds to back up the NCUSIF as needed.
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