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Equity ratio net worth changes passed by NCUA
ALEXANDRIA, Va. (9/23/11)--Amendments to the Federal Credit Union Act’s definitions of the National Credit Union Share Insurance Fund’s (NCUSIF) definitions of equity ratio and credit union net worth were unanimously approved by the National Credit Union Administration (NCUA) board on Thursday. The Credit Union National Association (CUNA) following the meeting said it strongly opposes an provision that requires credit unions to deduct the amount of any bargain purchase gain from the net worth of a target credit union before a merger, adding following the meeting that this change “could result in a lower post-merger net worth, potentially discouraging mergers.” NCUA Chairman Debbie Matz during the meeting said the agency did not intend for these changes to discourage mergers or to negatively impact credit unions that have merged. The bargain purchase gain changes will not apply to mergers that have already begun or already have been approved. The changes are set to become effective thirty days after the final rule is published in the Federal Register. However, agency staff hinted that the effective date may be pushed closer to the end of 2011, as some changes to call reports cannot be made within thirty days. The equity ratio changes clarify that the NCUSIF’s equity ratio must be based solely on the financial statements of the NCUSIF alone, without consolidation with other statements such as those of conserved credit unions. Under the changes, section 208 assistance provided to troubled credit unions will soon qualify as regulatory net worth for natural-person credit unions under NCUA's Prompt Corrective Action authority. Board Member Gigi Hyland asked whether a line detailing any section 208 assistance could be added to a credit union’s call report, but NCUA staff said such a line should not be added. The NCUA’s Office of General Counsel was concerned that adding that extra detail could negatively impact credit unions that receive section 208 assistance, NCUA staff explained. For more on the NCUA meeting, use the resource link and see today’s NewsNow coverage.
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