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Corporate Resolution Costs, NCUA Guaranteed Notes Continue Improvement

March 2016
Corporate Resolution Costs, NCUA Guaranteed Notes Continue Improvement

Sound Management Policies, Litigation Strategy Make Future Assessments Unlikely

ALEXANDRIA, Va. (March 31, 2016) – Updated information on the costs of the Corporate Resolution Program and the performance of the NCUA Guaranteed Notes Program is now available online, the National Credit Union Administration announced today.

The upper and lower ends of the projected assessment range for the Temporary Corporate Credit Union Stabilization Fund remain negative, from negative $1.6 billion to negative $3.2 billion, respectively. As long as both ends of the range remain negative, it is unlikely NCUA will charge credit unions future Stabilization Fund assessments.

“Six years, ago, projections of possible Stabilization Fund assessments to credit unions ran as high as $9.2 billion,” NCUA Board Chairman Debbie Matz said. “However, prudent management of the Stabilization Fund, an improving economy and an effective legal strategy have produced a much better long-term outcome for federally insured credit unions. At present, we do not see a need for further assessments, and we will continue our sound management policies and litigation strategy.”

These projections, Matz said, are subject to change based on the performance of the failed corporates’ legacy assets, future legal recoveries and economic variables such as interest rates, unemployment and housing costs. NCUA uses BlackRock, an independent securities valuation firm, to project the future performance of the legacy assets in the NCUA Guaranteed Notes Program.

Credit unions have paid $4.8 billion in assessments since the creation of the Stabilization Fund in 2009. The Stabilization Fund is scheduled to close in 2021. NCUA is still obligated to repay $1.7 billion in outstanding borrowings from the U.S. Treasury. Principal and interest on the NCUA Guaranteed Notes, as well as other obligations of the Stabilization Fund, also must be fully repaid before NCUA can distribute any remaining funds to credit unions.

More information about Corporate Stabilization Resolution costs incurred to date and projected future Stabilization Fund assessments is available online at the Questions and Answers page.

NCUA also has recovered $2.5 billion from the Wall Street firms that sold the faulty mortgage-backed securities to the failed corporate credit unions.  NCUA is using the net proceeds from these settlements to reduce the costs that federally insured credit unions need to pay for the corporate resolution.

NCUA has 12 pending law suits related to faulty securities against underwriters, issuers, trustees and various banks and one suit against various banks that participated in setting the London Interbank Offered Rate.

As part of its overall efforts to promote transparency, NCUA will continue providing periodic updates on the estimates of the costs associated with the Corporate Resolution Program, the performance of the NCUA Guaranteed Notes Program, and the total anticipated assessments credit unions will pay during the life of the Stabilization Fund.

Board Member
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