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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 10, 2009

April 10, 2009, Alexandria, Va. – The National Credit Union Administration (NCUA) today issued a summary of the agency’s analysis of the distressed securities held by U.S. Central Federal Credit Union (U.S. Central) and Western Corporate Federal Credit Union (WesCorp).  The summary is available online at http://www.ncua.gov/Resources/CorporateStabilization/index.aspx.

Chairman Fryzel stated, “I recognize that until now credit unions have not had an opportunity to better understand the nature of the securities held by WesCorp and U.S. Central and the stress they are under.  The incomplete or insufficient nature of available information has led some to question the necessity of the NCUA’s actions and level of expected credit losses being projected.  The outline released today of the portfolios of WesCorp and U.S. Central, and NCUA’s associated summary analysis, provides a concise synopsis of the respective portfolios and enables informed parties to appreciate the scope and severity of the stress on these investments.  Though virtually all of the securities purchased by these two corporate credit unions were AAA or AA rated at the time of purchase, the summary clearly demonstrates how the nature of the securities and the deterioration in the economy have resulted in significant expected credit losses.  In the near future NCUA will also be releasing a summary of the PIMCO report.

“I am also aware of the many questions surrounding how member credit unions will account for any impairment or write-down of paid-in-capital and membership capital accounts at corporate credit unions.  NCUA will be issuing guidance next week on this subject.

“The comment period for the Advanced Notice of Proposed Rulemaking closed on April 6, 2009.  NCUA received almost 500 comment letters and is in the process of analyzing them for incorporation into a proposed rulemaking to reform the prudential regulatory regime corporate credit unions will operate under going forward.  Implementation of any restructuring of the corporate credit union system will be a deliberate process that will take time, but it is vital NCUA moves purposefully in reforming the regulatory foundation upon which to build the future of the system.”

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

  • U.S. Central and WesCorp have established a process for members to request the CUSIP numbers and par values for the securities held respectively by each corporate credit union.  Recipients of this information are subject to the terms of a non-disclosure agreement.
  • Liquidity remains stable.  Seasonal outflows of funds typically occur in April and May, so it is important credit unions continue to support liquidity in corporate credit unions to prevent the selling of distressed assets into the current dysfunctional market.
  • As part of the conservatorship management teams’ fiduciary responsibility, the review of all private label mortgage backed securities by one of U.S. Central’s and WesCorp’s external vendors respectively is underway.  The goal remains to have each analysis by late April or early May for posting March 31, 2009 financial statements.  These reviews will aid in determining the level of Other-Than-Temporary-Impairment (OTTI) charges both corporate credit unions will record, as well as finalizing the outstanding CPA audits.  This is part of an ongoing process to improve the management of these portfolios.
  • Extensive reviews of all contracts, third-party relationships, and operational efficiencies are ongoing at both corporate credit unions.
  • Member communication and outreach efforts continue.  WesCorp is scheduling a conference call for next Wednesday, April 15, 2009 from 2:30-3:30 P.M. Pacific Time designed for small to medium sized member credit unions.  U.S. Central is still planning to host a conference call with members on April 14, 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.

 

-NCUA-