ACCU Says Corporate Losses Should Be Actual, Not Estimates
Association of Corporate Credit Unions Executive Director Brad Miller said he disagrees with the NCUA's decision to record corporate losses based on future estimates, and said his organization believes the agency should instead seek alternatives that match capital depletion with actual realized losses, when and if they occur.
Loss estimates can be "carefully and reasonably constructed", he said, but they nonetheless depend upon complicated and unknown future events like interest rates, the housing market and the economy.
"[Owners of corporate capital] have specific rights to any possible future gains of the OTTI amounts that might occur in the future," he said. "If the eventual realized credit losses on the portfolios are less than the amount that was necessary to impair member capital, the resulting gains should accrue proportionally to the original capital holders that helped fund the assets with at-risk capital."
Miller added he's not trying to build up false hope among credit unions, but the fact that some recovery is possible requires that alternatives be considered.