Credit unions should be allowed to prepay their assessments and the NCUA should consider borrowing additional money from the Treasury, NAFCU President/CEO Fred Becker suggested in a letter sent to NCUA Chairman Debbie Matz today.
Becker wrote that his association is making those suggestions because of what he called the "affordability factor" given the financial challenges facing many credit unions.
He wrote that allowing credit unions to prepay their assessments would allow them to avoid "the negative accounting treatment that would otherwise result." The FDIC adopted the practice of prepayment for banks in November 2009.
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Becker also said that while the Temporary Corporate Credit Union Stabilization Fund has $6 billion in borrowing authority from the Treasury, the agency should request to borrow additional money because "current economic factors clearly justify such additional borrowings."
Under legislation passed by Congress last month, the NCUA will be able to make payments to the TCCUSF without borrowing from the Treasury Department. Currently, the agency has to borrow the money from the Treasury Department to repay the fund and then assess credit unions. Under the new law, the agency could assess credit unions a premium first, without incurring borrowing costs.
Becker wrote Matz that the changes he is suggesting are needed in light of the tenuous state of the economy and the fact that the credit union industry hasn't been able to achieve a 1% ROA during the past several years.
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