Remaining Corporate Stabilization Costs Decrease
The high end of the net remaining corporate assessments declined $2.3 billion between December 2012 and July 2013, the NCUA announced Friday.
The decline in remaining Temporary Corporate Credit Union Stabilization Fund assessments is a combination of a $1.6 billion decrease in expected costs and the $700 million assessment collected in October 2013. Total future remaining assessments are now projected to be no higher than $1.6 billion. At the end of 2012, the projected range was $1.6 billion to $3.9 billion.
The NCUA Board announced at its Nov. 21 meeting that the agency expects no corporate assessment for 2014, in part due to the recently announced $1.4 billion settlement with JPMorgan Chase. The estimates for future assessments released Friday were calculated from data at the end of the second quarter of 2013 and do not include that settlement. The JPMorgan Chase settlement will be incorporated into future assessment range calculations, including a special, high-level website update as of the third quarter of 2013 that NCUA will release in the coming months, the regulator said.
“A great deal of disciplined work and careful planning has kept the Corporate Resolution on-track, and the new estimates are very good news,” NCUA Board Chairman Debbie Matz said. “Our continued recoveries from Wall Street firms responsible for the corporate crisis, now totaling more than $1.75 billion, an improving economy and the NCUA’s continuing efforts to effectively manage losses are helping reduce future credit union assessments.”
The NCUA released the new projections as part of the semi-annual update of the costs of the Corporate System Resolution and the performance of the NCUA Guaranteed Notes Program. Since the stabilization fund’s creation in 2009, credit unions have paid $4.8 billion in assessments. Although the fund will expire in 2021, assessments may end sooner.
The narrower range of projected remaining assessments reflects the actual performance of the failed corporate credit unions’ legacy assets to date and the NCUA’s updated evaluation of the macroeconomic factors used in projecting the future performance of NGNs.
Factors influencing the estimated range include changes in housing prices, interest rates, unemployment rates and mortgage prepayments. The NCUA uses BlackRock, an independent securities valuation firm, to project the future performance of the legacy assets in NGNs, a key component of this analysis.
The NCUA still has 16 pending lawsuits against other underwriters seeking recoveries on the securities purchased by the failed corporate credit unions. By lowering the cumulative losses on the legacy assets, net recoveries help reduce the assessments that federally insured credit unions will need to pay over time through the Stabilization Fund.