ALEXANDRIA, Va. (3/25/09)—The National Credit Union Administration (NCUA) Monday released certain information regarding independent analysis of corporate credit union residential mortgage-backed securities (RMBS) and NCUA’s conservatorship of U.S. Central FCU and Western Corporate FCU. The analysis is from the Pacific Investment Management Company LLC (PIMCO). The NCUA also released an associated frequently-asked-questions (FAQs) document. The NCUA said it requested the PIMCO analysis to obtain “an independent, objective assessment” of potential losses resulting from holding RMBS to maturity. An independent review was necessary, the agency indicated, because:
* The portfolios with RMBS have highly complex structures that require considerable expertise to model and analyze; * The growing amount of unrealized losses on investment securities and the troubling amount of rating downgrades compelled NCUA to independently determine the amount of expected credit impairment; and * The NCUA developed concerns about the portfolio management abilities of the largest corporate credit unions and did not want to rely solely on the institutions’ own analyses.
The NCUA said the PIMCO report augments National Credit Union Share Insurance Fund analysis of the potential losses stemming from corporate credit union portfolios. The agency added that the FAQs explain why the NCUA conserved the corporate credit unions, and provides a wide range of information about their liquidity, what credit unions can do to support stabilization efforts, TARP funding, and the future structure of corporate credit unions. The Credit Union National Association (CUNA), which has been seeking more transparency from the agency regarding its action on corporates, said the information was good as far as it goes, but does not provide any real analysis of the numbers involved. CUNA Deputy General Counsel Mary Dunn said, “We will continue pressing NCUA for much more information so that credit unions can at least have a better understanding of the insurance costs and why NCUA is advising credit unions that capital in these two corporates and possibly others is impaired to the extent NCUA is indicating.” Use the resource links below.