Credit Union Refunds from the NCUA Temporary Corporate Credit Union Stabilization Fund

Resources on NCUA's Proposed Rule to Close the TCCUSF and Set the Share Insurance Fund Normal Operating Level

VIDEO: NAFCU discusses NCUA's stabilization fund closure proposal

On July 20, 2017, the NCUA Board proposed to close the Stabilization Fund in 2017 and increase, for the time-being, the normal operating level (NOL) of the SIF. Under the proposal, the assets and liabilities of the Stabilization Fund would be distributed to the SIF, which would increase the SIF's equity ratio. 

After closure, the SIF would assume the liabilities of the Stabilization Fund, including any potential declines in market value of legacy assets collateralizing the NCUA Guaranteed Notes (NGNs). As such, NCUA is proposing to increase the NOL from 1.30 to 1.39 percent to offset the perceived risk from the assumption of the Stabilization Fund's liabilities, as well as to protect from moderate recessions.

According to NCUA, the Board is proposing to raise the NOL to maintain a counter-cyclical insurance fund that accounts for economic downturns. NCUA estimates that closing the Stabilization Fund and transferring its assets to the SIF would increase the equity ratio to approximately 1.45 - 1.47 percent. When the equity ratio exceeds the NOL, along with other statutory requirements that have already been met, the FCU Act requires the SIF to make a pro rata distribution to credit unions based on the equity ratio's excess over the NOL.

If the Board approves an NOL of 1.39 percent, NCUA estimates that the SIF would distribute a rebate to credit unions in 2018, but it would be about 60 percent lower than if the NOL is not changed. 

The Board seeks comments on whether it should close the Stabilization Fund in 2017, close it at some future date, or wait until it is currently scheduled to close in 2021. The Board also seeks comments on whether it should set the NOL based on the SIF's ability to withstand a moderate recession, or whether it should be able to withstand a severe recession. Finally, NCUA would like comments on whether to base its approach to setting the NOL on preventing the equity ratio from declining below 1.20 percent, or some other higher minimum level. Download our comment letter template and talking points (member-only) to help formulate your credit union comment letter to NCUA due September 5, 2017. Download NAFCU's Official Comment Letter to NCUA.

NAFCU's Position on TCCUSF Refunds

NCUA estimates that merging the Stabilization Fund into the SIF would provide credit unions with a partial rebate, but NAFCU believes that any rebate should be much greater and that the proposed increase of the NOL is unacceptable.

For our part, NAFCU believes the agency's decision must take into account two facts: 1) under the Federal Credit Union Act, NCUA is not required to assess a premium in 2017, and 2) NCUA has the ability to return assets to credit unions directly. The money credit unions paid to NCUA came from their members, and it should be returned to the fullest extent possible.

NAFCU strongly urges the agency to avoid such a dramatic increase of the NOL and to rebate credit union monies as soon as possible.

Issue Background Information

On May 20, 2009, the President signed into law the Helping Families Save Their Homes Act of 2009. The legislation amended the Federal Credit Union Act (FCU Act) to provide NCUA with authorities to mitigate costs associated with stabilizing the corporate credit union system, so those costs would not have to be borne by the National Credit Union Share Insurance Fund (NCUSIF). Acting under its new authority granted by Congress, in June 2009, the NCUA Board implemented the Stabilization Fund to cover the costs of the Corporate System Resolution Program, approved in September 2010 as a comprehensive strategy to address the failure of five corporate credit unions due to investment losses. Initially, the Stabilization Fund was set to expire after seven years. However, NCUA and the Department of the Treasury agreed in September 2010 to extend the life of the Stabilization Fund until June 30, 2021.

Under Section 202 of the FCU Act, any NCUSIF premiums or assessments must be shared proportionally by all federally insured credit unions based on the credit union's insured shares. The Corporate System Resolution Program was established as a means to cover corporate resolution costs within the credit union system.

Under the FCU Act, the NCUA Board has the authority to determine annual assessments until the Stabilization Fund expires in June 2021. Whether credit unions will be subject to future assessments is based on a number of factors, including the current year's cash needs relative to the Stabilization Fund, as well as performance and projected losses and cash flows on the Legacy Assets. As of the third quarter of 2016, NCUA projects there will likely be no need for future assessments. In fact, the projected net assessments range of negative $4.9 billion to negative $3.4 billion indicates the possibility of a refund at the end of the Stabilization Fund in 2021. Further, in October 2016, NCUA fully repaid the $1 billion outstanding balance on the agency's borrowing line with the U.S. Treasury. With this final payment, the Stabilization Fund's outstanding borrowings are fully paid off, which might further indicate that future rebates or recoveries to insured credit unions may be possible.

Download our FAQ document for more information (as of August 2017).

Recent Regulatory Comment Letters

Read recent letters from NAFCU to NCUA on this important issue.

August 28, 2017 - NAFCU Letter on TCCUSF Closure and Share Insurance Fund Normal Operating Level Increase

November 1, 2016 - NAFCU Board Letter on TCCUSF Refunds to Credit Unions

Updated August 2017