The NCUA Board on Sept. 16 approved a share insurance fund premium of 12.42 basis points. At that board meeting Chairman Debbie Matz read a statement. An excerpt:
Some stakeholders called for NCUA to maintain the equity ratio below the low end of the normal operating floor of 1.2%. We gave this strategy serious consideration.
However, knowing the magnitude of credit union losses the fund has absorbed this year, plus additional losses which are likely to occur in the coming year, it is not practical to manage the fund without a reasonable margin of safety.
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. .To put it simply: The stakes are too high. We cannot afford to aim low and miss the target.
In these volatile times, narrowing the fund's safety margin would be irresponsible.
The responsible public policy is to manage the fund cautiously. We are restoring a reasonable margin of safety today, rather than risking a loss of confidence tomorrow.
Based on optimistic projections, today's premium will keep the equity ratio above 1.2% through December of 2011.
But whether or not the fund meets those projections is really up to credit unions.
The most important factor in both the premium level and the equity ratio is the credit union industry's financial performance. If credit union losses are lower, credit union premiums will be lower. That also means if credit union losses are lower, the equity ratio will be higher.
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