Voluntary Prepayment of Stabilization Fund Assessments Results Fall Short of $500 Million Goal

Posted by Marissa Anema Wednesday, August 03, 2011 11:11:00 AM

ALEXANDRIA, Va. - NCUA announced in a press release yesterday that it did not receive sufficient pledges from credit unions to meet the minimum threshold for triggering the Voluntary Prepayment of Corporate Stabilization Fund Assessment. The agency received nearly $370 million in pledges from credit unions, but fell short of the required $500 million threshold. Therefore, NCUA has announced this program will not launch in 2011.

Of the nation's nearly 7,300 federally insured credit unions, 799 pledged $369.9 million to voluntarily prepay assessments. In response to requests from credit unions, the NCUA Board had determined that the program would not go forward if less than $500 million in pledges were received. Therefore, NCUA will not debit any voluntarily pledged amount from any credit union.

If the pledge threshold had been met, NCUA would have reduced the assessment by 6.4 basis points, resulting in a net 18.5 basis points for the 2011 assessment. It is important to note that prepayment of assessments would not have changed the ultimate cost of the corporate resolution plan-it would have only affected the timing of expensing stabilization fund assessments.

NCUA Board Chairman Debbie Matz commented, "NCUA responded to credit union requests and created a viable alternative to offer prepayments as a way to manage assessments in the long run. While the pledges fell short of meeting the required threshold to move forward, the NCUA Board remains open, perhaps, to reconsidering this issue next year."

NCUA stated that it established the $500 million goal to satisfy credit unions' strong preference to dedicate all funds raised through voluntary prepayments to dollar-for-dollar reductions in 2011 Corporate Stabilization Fund assessments. The vast majority of the 184 comments NCUA received indicated that dollar-for-dollar reductions should be a key principle for the program. NCUA felt that reaching the $500 million goal and proceeding with voluntary prepayments would have preserved the agency's flexibility in managing the regular annual assessments over the life of the Stabilization Fund, which is an expense to credit unions. This program goal amount also would have ensured the cash needs and contingency funding necessary for the Stabilization Fund.

The NCUA Board may consider reviving a prepayment program in 2012 if significant credit union interest continues to exist. The Board is slated to consider the 2011 assessment rate for the Stabilization Fund in the coming weeks.

To read the NCUA Board's full press release click here.

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