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For Details, Contact NCUA Public & Congressional Affairs
E-mail: pacamail@ncua.gov
Phone: 703.518.6330

National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428
Fax: 703.518.6409


Media Advisory

FOR IMMEDIATE RELEASE

Weekly Corporate Credit Union Update –

April 24, 2009

April 24, 2009, Alexandria, Va. – The National Credit Union Administration (NCUA) Board this week took actions to ensure corporate credit unions are able to continue providing services to members and to enhance the Temporary Corporate Credit Union Share Guarantee Program. 

Chairman Fryzel stated, “We anticipate some corporate credit unions will reflect losses that will be absorbed by capital when they post their March 31, 2009, financial statements, or should they restate their December 31, 2008, financial statements.  As many of the functions that corporate credit unions perform are tied to the level of capital, there was a serious concern that they would be unable to provide normal daily operational services to their member credit unions after recording capital losses.  To avoid any disruption of critical services, the NCUA Board has issued an order that will permit corporate credit unions to use the capital level as reported on their November 30, 2008, NCUA 5310 Call Report, for purposes of determining regulatory compliance with capital-based requirements and regulations in the corporate rule.  However, the OCCU Director has been delegated the authority to restrict or modify this general waiver as it applies to a particular corporate credit union based on safety and soundness considerations.  We believe this will allow corporate credit unions to continue to meet members’ needs while also ensuring corporates do not take additional undue risk. 

“The Board also took action to modify the Temporary Corporate Credit Union Share Guarantee Program.  The program was adopted to ensure credit union confidence in the corporate system and maintain an adequate level of liquidity so that corporates would not be forced to sell securities in this current distressed market.  The original program was scheduled to expire on December 31, 2010.  There is concern that a significant amount of shares may be scheduled to mature on the Program expiration date – leading to an unintended negative impact on liquidity.  Going forward, there will be a quarterly reassessment of the liquidity needs in the corporate system, and if it is determined the need exists, the program will be extended.  The Board has authorized quarterly extensions of the guarantee through December 31, 2012.  If the extensions are granted, the final guarantee will expire on December 31, 2014.  All corporate credit unions will have the opportunity to participate in the modified Temporary Corporate Credit Union Share Guarantee Program.

“The NCUA recently posted the March 31, 2009, financial statements for the share insurance fund.  Questions have arisen as to the $10 billion in borrowings noted in the financial statements.  It is standard agency procedure as part of any conservatorship action to conduct pre-planning for contingency needs.  With the conservatorship actions taken at U.S. Central Federal Credit Union (U.S. Central) and Western Corporate Federal Credit Union (WesCorp), NCUA prepositioned funding to address any unusual outflows of member funds.  This short-term loan was to prevent any disruption in the normal processing of payments for the millions of natural person credit union members flowing through these corporate credit unions.  This preventative liquidity loan was taken as a deliberate precaution and the funds were not in response to an actual liquidity shortfall.  In fact, there have been no material share outflows since the conservatorships.”

Normal operations continue without interruption at U.S. Central and WesCorp.  The following items specific to U.S. Central and WesCorp are of note:

  • The reviews of all private label mortgage backed securities by Clayton Fixed Income Services, Inc., at both U.S. Central and WesCorp are nearing completion.  The results of these reviews, taken with NCUA’s own analysis, will assist in finalizing the level of Other-Than-Temporary-Impairment (OTTI) charges both corporate credit unions will record.  This information will be the last step for both corporates in finalizing their 2008 audited financial statements.  The March 31, 2009, financial statements are expected to be released in May.
  • Liquidity remains stable.  The support of member credit unions has been critical to maintaining adequate liquidity in the corporate credit union system.  Seasonal outflows normally associated with April and May have begun.  It is anticipated the Temporary Corporate Credit Union Share Guarantee Program will continue to instill member confidence in retaining deposits at their corporate credit unions. 
  • Member communication and outreach efforts continue.  The following is a summary of communications efforts for each corporate credit union:

- U.S. Central - Periodic member teleconferences continue.  A teleconference was held on April 22.  An in-person member meeting is scheduled for April 29, 2009.

- WesCorp - Member teleconferences scheduled for Tuesday, Wednesday, and Thursday each week began on April 15 and will continue through May 15.  Town hall meetings are scheduled to kick off on May 18, 2009.

The National Credit Union Administration charters and supervises federal credit unions. NCUA, with the backing of the full faith and credit of the U.S. government, operates and manages the National Credit Union Share Insurance Fund, insuring the accounts of nearly 89 million account holders in all federal credit unions and the majority of state-chartered credit unions. NCUA is funded by credit unions, not federal tax dollars.


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