Onsite Coverage: NCUA Stabilization Assessment Brought Silver Lining
If there was a bright line of hope during the NCUA Board's decision Monday to assess credit unions for corporate credit union losses, it came from analysis that held those losses in the future may not be as bad as originally projected.
As of Dec. 31, 2010, remaining losses to the corporate Stabilization Fund had been estimated at between $5.0 billion and $7.2 billion. But the most current estimate, as of June 30, 2011, projected remaining losses at between $1.9 billion and $6.2 billion.
But the lowered numbers also brought some additional uncertainties.
Larry Fazio, NCUA's director of examination and insurance, told NCUA Board members that increased economic instability was behind the most recent projections and that the width was appropriate given how underlying economic factors like unemployment and home prices will impact how the securities perform or fail to perform.
“Yes, I say can it’s very likely that we will be back here in December with different figures,” Fazio said, in response to a question from Board Member Michael Fryzel.
Another hopeful item came in the projection that the NCUA would not need to assess any additional premium for the National Credit Union Share Insurance Fund for next year.
“Should the number of credit union failures remain near the current pace (our optimistic scenario) an NCUSIF premium will not be necessary in 2012. Even in the pessimistic scenario forecast, a 2012 premium of $607 million (about 7 basis points of insured shares) would return the NCUSIF's equity ratio to a full 1.30% of insured shares,” Mary Ann Woodson, the NCUA's chief financial officer, told the board.