CHICAGO - The NCUA won't allow the NCUSIF's equity ratio to fall below 1.2% for long because doing so would be "irresponsible,'' NCUA Chairman Debbie Matz said today at a luncheon address at NAFCU's Annual Conference.
She also told attendees that it is "not practical to try to manage the ratio to just a few basis points above the statutory minimum of 1.0%."
She said if current trends in credit union losses continue, the fund's equity ratio -currently 1.22%-- is likely to fall below 1.2% by the fall. In response to some of these financial problems, CUNA and NAFCU had asked the agency to consider letting the fund drop below 1.2% to minimize the assessment that would be levied on credit unions but Matz said the board would consider keeping the ration a few basis points below 1.2% "for a limited."
The NCUA Board is scheduled to vote on the amount of the assessment for 20010 at its Sept. 16. This will be in addition to the 13.4 basis points of insured shares assessment that the agency announced earlier this year to pay back this year's portion of the loan from the Treasury Department which financed the Temporary Corporate Credit Union Stabilization Fund.
Matz declined to say what the assessment would be but laid the groundwork for doing so by noting that in 2009 there was a charge of $124 million to the NCUSIF because of credit union failures while so far the fund's provision for loan loss for this year is $1.1 billion.
She said that to reduce the magnitude of future losses -and future assessments--her agency had increased the frequency of examinations and made the process more rigorous. But she also said that credit unions could take steps to minimize the size of future assessments by "managing risks effectively and by restraining costs reasonably.''