trending Market Intelligence /marketintelligence/en/news-insights/trending/x70sl6v11ipzjbq3wahshq2 content esgSubNav
In This List

Credit unions eager to hear NCUA detail stabilization fund rebate plan


Banking Essentials Newsletter: 7th February Edition

Case Study

A Bank Outsources Data Gathering to Meet Basel III Regulations


Private Markets 360° | Episode 8: Powering the Global Private Markets (with Adam Kansler of S&P Global Market Intelligence)


Banks’ Response to Rising Rates & Liquidity Concerns

Credit unions eager to hear NCUA detail stabilization fund rebate plan

The National Credit Union Administration will have credit unions' attention Feb. 15 when the board is set to discuss the process of distributing stabilization fund rebates.

The NCUA on Sept. 28 voted to close the temporary corporate credit union stabilization fund and transfer its assets and liabilities to the share insurance fund. Board members said it will likely result in an initial rebate of between $600 million and $800 million being returned to credit unions in 2018.

When all is said and done, $2.6 billion to $3.0 billion could be returned through dividends to credit unions and their members.

But the calculations used to determine rebates and the process itself may not be simple. NCUA spokesman John Fairbanks said in an email to members of the media that the presentations to be used in regard to the distribution are going to be complex. He added that the NCUA is working on a FAQ list that will anticipate questions about the distribution rule, how it will work and provide answers.

Those watching closely will include Atlanta-based Pinnacle CU President and CEO Matthew Selke. In an interview, he said there are many credit unions that are "livid" that the two funds were merged. Selke and other members of a group called the Coalition to Appeal NCUA Board Action also say credit unions were assessed almost $5 billion in premiums to fund the work of the stabilization fund from 2009 through 2012, and the NCUA is not refunding enough money.

"Basically, instead of giving us back $100,000 or more, we will probably see maybe $50,000 or $60,000," he said. "So my point of view is a very muted thanks to the NCUA for returning some funds, but I'm really pissed that we are not getting our fair share that's due to our members."

In its response letter to the NCUA's vote to merge the funds, the National Association of Federally-Insured Credit Unions said the NCUA's plan would provide only about 40% of what is rightfully credit unions', leaving a 60% premium charged to the industry. "NCUA is attempting to distract credit unions with the promise of dividends as the agency hoards nearly $800 million for itself," NAFCU said in the letter.

NCUA board member Rick Metsger in September said the regulator has been accused of keeping credit unions' money and engaging in a "cash grab." But he said the agency is only in a position to return some of the funds now because of the success of lawsuits that have netted more than $5 billion.

At the same time it voted to merge the funds, the NCUA said it had to guard against reasonably foreseeable adverse economic conditions, so it raised the normal operating level of the share insurance fund to 1.39% from 1.30%.

NAFCU and others railed against the move, but Arkansas FCU CFO Eric Mangham said he has no issue with the 1.39% level, saying the NCUA has the expertise to best understand what its future losses could be. "I think they're within their right to establish effective reserves to mitigate losses within the system," he said.

He added that the share insurance fund needs to remain well-capitalized, especially in case something unforeseen were to happen to one of the largest credit unions in the country. "If something bad were to happen to one of them it would be very bad for the entire fund," he said.

Mangham said the Jacksonville, Ark.-based credit union conservatively expects to get about $588,000 in 2018 based on a calculator provided by NAFCU. Some credit unions have said they were hesitant to build the refund into their 2018 budget, but Mangham said because it seems likely to occur, the prudent thing to do was to budget for it.

So, how will those funds benefit members? Arkansas FCU President and CEO Rodney Showmar said in an interview that the credit union is considering rolling out some new loan programs and will expand its delivery channels. The extra capital could also be used for an acquisition. The credit union has not been shy about discussing the possibility of buying a bank.

Regardless of the amount being returned, Showmar said it will certainly help credit union members. "We're just happy that we're finally going to get some money back," he said.