No Plan for NCUSIF Exits Hits Sour Note
Because conversions to private insurance and mutual savings banks are “relatively rare,” the NCUA isn’t developing a contingency plan for helping credit unions that stay in the system deal with any additional costs from more departures, according to a letter from NCUA General Counsel Michael McKenna to NASCUS President/CEO Mary Martha Fortney.
He wrote that all five credit unions with conversion applications (three to mutual savings banks and two to private insurance) will pay this year’s assessment to the Temporary Corporate Credit Union Stabilization Fund, and some will have to pay next year’s assessment. The fund was set up by Congress in 2009 to pay for the rescue of several troubled corporate credit unions.
Blaine, whose $23 billion credit union is based in Raleigh, N.C., also noted that during the 1990s, thrift institutions that wanted to leave the Savings Association Insurance Fund and join the Bank Insurance Fund were charged an exit fee in order to pay for some of the billions of dollars of costs incurred from savings and loan failures.
At the time, there was a 19.5 basis point difference between the premiums levied by the two insurance funds. The exit fee should be a model for what the NCUA does, with the help of Congress, to ensure that those credit unions that remain in the system don’t have to pay more of the rescue costs, Blaine said.
According to the NCUA, three credit unions with a total of $3 billion in insured shares are in some stage of the process of converting to mutual savings banks. But the agency said only one of those credit unions, the $188 million Har-Co Maryland FCU in Bel Air, Md., is far enough in the application process to release the name.
Two credit unions, with total insured shares of $124.7 million, have applied to convert to private deposit insurance. Those credit unions are School Employees Lorain County CU in Elyria, Ohio, and Pacifica-Coastside CU of Pacifica, Calif.