The NCUA board on Thursday agreed to seekcomments on a plan to close the Temporary Corporate Credit UnionStabilization Fund at the end of September—a move that eventuallycould result in a Share Insurance Fund distribution to federallyinsured credit unions of $600 million to $800 million nextyear.

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The stabilization fund had been scheduled to close in 2021.

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Under federal law, the stabilization fund has been used toprovide the agency with the ability to mitigate costs fromstabilizing the corporate credit union system.

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The board also agreed to seek comment on a plan to increase thenormal operating level of the Share Insurance Fund from 1.30% to1.39%.

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“The Stabilization Fund has, accordingly, served its purpose ofretaining the resolution costs of the five failed corporate creditunions within the credit union system, at no cost to taxpayers,”NCUA Board Chairman J. Mark McWatters said.

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He said that increasing the equity ratio would allow the ShareInsurance Fund to withstand a moderate recession.

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“Prudent administration of the Share Insurance Fund and therelated protection it provides for member deposits are paramountand fundamental to maintaining a safe and sound national creditunion system,” McWatters said.

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Board member Rick Metsger said that the agency estimates thatduring the next several years, between $2.6 billion and $3 billionin dividends will be returned to credit unions.

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Metsger said that while comments on the proposals are due onSept. 5, stakeholders should send in comments as soon aspossible.

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“While we want to hear your comments on this proposal, time isof the essence if credit unions want to receive a dividend in2018,” he said. “We need to merge the funds by September 30 ifwe want to be able to declare a dividend at the end of the yearthat's payable in 2018.”

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NAFCU President B. Dan Berger applauded the opportunity todiscuss folding the stabilization fund, but immediatelyexpressed concern about the increase in the operating level of theinsurance fund.

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“However, the proposed substantial increase in the normaloperating level is unacceptable, and NAFCU will strongly urge theagency to avoid such a dramatic move,” said Berger.

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The notice soliciting comment also states that the board isaware of industry opinions that a distribution to credit unionsdirectly from the stabilization fund is permitted under federallaw. The notice states that the board does not believe that ispermitted under federal law.

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Berger also disputed that assertion.

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“We believe the NCUA has the legal authority to return assets tocredit unions directly,” he said. “The money credit unions pay tothe NCUA comes from its members, and it should be returned to thefullest extent possible.”

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NCUA CFO Rendell Jones also told the board that only two creditunions have failed so far during 2017, while 14 failed last year.He said that the number of problem credit unions stands at 210, up13 from March.

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He also told the board that the agency's operating budget isrunning $5.8 million less than the projected budget. Some ofthat savings came as a result of the agency having 50 unusedfull-time equivalency positions.

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The board also agreed to publish a proposed rule that governsShare Insurance Fund Equity Distributions and a proposal to amendrules governing emergency mergers.

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