ALEXANDRIA, Va.– NCUA has provided an update on the costs of its Corporate Resolution Program and the performance of its NCUA Guaranteed Notes Program.
The upper and lower ends of the projected Stabilization Fund assessment range remain negative, from a negative $2.5 billion to a negative $700 million, the agency said, noting that as long as both ends of the range remain negative, it is unlikely it will charge credit unions future Stabilization Fund assessments.
“The current cost projections are good news for credit unions,” NCUA Board Chairman Debbie Matz said in a released statement. “Five years ago, assessment projections ranged as high as $9.2 billion, but careful management and an improving economy have helped brighten the picture considerably. We can now see a future with no further assessments. With six more years until the expiration of the Stabilization Fund, NCUA will continue to exercise prudence, and we will continue our efforts to hold accountable the Wall Street firms responsible for the crisis.”
These projections, Matz said, are subject to change based on the performance of the failed corporates’ legacy assets, future legal recoveries and economic variables such as interest rates, unemployment and housing costs. NCUA uses BlackRock, an independent securities valuation firm, to project the future performance of the legacy assets in the NCUA Guaranteed Notes.
Credit unions have paid $4.8 billion in assessments since the creation of the Stabilization Fund in 2009. The Stabilization Fund is scheduled to expire in 2021. NCUA is still obligated to repay $2.6 billion in outstanding borrowings from the U.S. Treasury. Principal and interest on the NCUA Guaranteed Notes, as well as other obligations of the Stabilization Fund, also must be fully repaid before NCUA can distribute any remaining funds to credit unions.
NCUA has pending litigation against several Wall Street firms, seeking recoveries on faulty securities purchased by the failed corporate credit unions as well as separate litigation alleging violations of federal and state anti-trust laws by manipulation of interest rates in the London Interbank Offered Rate system. NCUA is also pursuing or participating in repurchase actions and litigation against trustees. Net recoveries from this litigation will help reduce the assessments credit unions will need to pay over time.