Cheney Urges NCUA to Allow Prepayments of Up to $1 Billion to Defray Costs of Corporate Rescues
CUNA President/CEO Bill Cheney on Friday asked the NCUA to raise the total amount of prepayments allowed to increase from $500 million to $1 billion so this year’s assessment for rescuing the corporate credit union system will decline even more.
Cheney wrote NCUA Chairman Debbie Matz that allowing just $500 million in total prepayments would only cause this year’s assessment to decline by 6.4 basis points. He said credit unions have told him that for that small a reduction participating in the program is “just not worth it.”
He also wrote that “greater prepayments in 2011 will lead to a smaller cash flow to the [Temporary Corporate Credit Union Stabilization]Fund in 2013 from that year’s assessments, and this led to the Board’s decision to limit the size of the prepayment plan. However, I believe liquidity planning by the agency is not making appropriate use of the $6 billion line of credit from the Treasury Department to the Fund.”
Cheney wrote that if the NCUA would allow the balance at Treasury to remain as high as $5.5 billion through 2013, the prepayment plan could be allowed to rise to $1 billion, and this year’s assessment could be reduced by as much as 13 basis points.
The agency, on its website, said it set the number at $500 million “to ensure that assessments stayed on a reasonable payment trajectory and to maintain a responsible level of borrowing capacity.’’
The NCUA is holding a webinar on the prepayment program on July 11 and commitment agreements from credit unions are due on July 29. The board will hold a special meeting on Aug. 29 to determine if there is sufficient interest in the prepayment plan.