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Hampel: Credit Unions can expect corporate stabilization refund

Thu, Jun 1, 2017

CUNA Chief Economist/Chief Policy Officer Bill Hampel offered good news in his credit union update at the CUNA CFO Council Conference in Orlando: Credit unions can expect a series of refunds on their contribution to the corporate stabilization fund.

Credit unions will not receive direct refunds of assessments. Instead, the surplus equity in the corporate stabilization fund will be added to the National Credit Union Share Insurance Fund (NCUSIF) and provide NCUSIF dividends, Hampel explains.

This will occur after the corporate stabilization fund is merged with the NCUSIF, which is expected to occur later this year, triggering a NCUSIF dividend early next year.

Hampel says credit unions can expect a 4 to 5 basis point (bp) dividend next year, and more significant dividends (perhaps as much as 20 bp in total) over the following three years.

Partial replenishment of member capital written down in the five conserved corporates will likely occur in 2021.

The temporary corporate stabilization fund was established in 2008, when five corporate credit unions became insolvent. In establishing the corporate stabilization fund, NCUA issued NCUA Guaranteed Notes in the amount of $28 billion, borrowed $6 billion from the U.S. Treasury, and assessed $4.8 billion to credit unions.

The original estimates for the cost of the resolution ranged from $14 billion to $16 billion. The range of estimates for the final cost has since been lowered to $5.5 billion to $7 billion.

Hampel says the lower costs are due to an improving economy, consistently low interest rates, legal settlements, and accounting provisions that overestimated losses.