Closing the Stabilization Fund and Setting the Share Insurance Fund Normal Operating Level
At its September 2017 open meeting, the National Credit Union Administration Board closed the Temporary Corporate Credit Union Stabilization Fund effective Oct. 1, 2017, and transferred all Stabilization Fund assets and obligations to the National Credit Union Share Insurance Fund.
At the same time, the Board approved setting the Share Insurance Fund’s normal operating level at 1.39 percent. Per the Federal Credit Union Act, the normal operating level is an equity ratio set by the NCUA Board and may not be less than 1.20 percent and may not be more than 1.50 percent. The Share Insurance Fund equity ratio is the total of credit unions’ one percent contributed capital deposits and retained earnings, less any gain or loss on investments, divided by total insured shares.
Following the closure and the assets transfer, the NCUA Board, at its February 2018 open meeting, authorized a statutorily required Share Insurance distribution of $736 million to eligible credit unions, to be paid in the third quarter of 2018.
The method used to determine how that distribution is allocated is described in a final rule (opens new window) approved by the Board at the February meeting. Below are frequently asked questions about the distribution.
Any future Share Insurance distributions will depend on the performance of the Share Insurance Fund and the normal operating level set by the Board.
There are remaining obligations of the Corporate System Resolution Program. The Board has expressed confidence those obligations can be prudently borne by the Share Insurance Fund without inordinate risk, provided the necessary equity is maintained.
Additional information on the Stabilization Fund and setting the Share Insurance Fund Normal Operating Level is available using the links below:
- Chairman J. Mark McWatters Statement
- Board Member Rick Metsger Statement
- Board Action Memorandum (opens new window)
- Final Notice (opens new window)
- Board Briefing (opens new window)
- Briefing Script (opens new window)
FAQs from February 2018 Board Meeting
- Share Insurance Fund Equity Distribution Accounting FAQs (opens new window)
- Share Insurance Fund Reserve Methodology FAQs (opens new window)
- Equity Distribution Rule FAQs (opens new window)
About the Stabilization Fund and Corporate System Resolution Program
The Temporary Corporate Credit Union Stabilization Fund was created in May 2009, to accrue the losses from five failed corporate credit unions and assess insured credit unions for such losses over time. But for the creation of the Stabilization Fund, these losses would have been borne by the National Credit Union Share Insurance Fund, exhausting the Share Insurance Fund’s retained earnings and significantly impairing credit unions’ one percent contributed capital deposit. The Stabilization Fund also is used to account for the costs of the Corporate System Resolution Program and provide short-term and long-term funding to resolve a portfolio of residential mortgage-backed securities, commercial mortgage-backed securities, other asset-backed securities, and corporate bonds, collectively referred to as Legacy Assets.
Under the Corporate System Resolution Program, NCUA created a re-securitization program where NCUA issued a series of NCUA Guaranteed Notes that were sold to investors to provide long-term funding for the Legacy Assets.
Additional information on the methodology used to determine the proposed normal operating level, legal considerations regarding closure of the Stabilization Fund, and accounting for the closure of the Stabilization Fund is included in the materials below:
- Q & A on NCUA's Proposed Stabilization Fund Closure Plan Webinar (opens new window)
- Closure Slides (opens new window)
- Closure Script (opens new window)
- Closure Federal Register Request for Comment (opens new window)
- Closure Board Action Memorandum (opens new window)
Additional information related to the Stabilization Fund and NGNs is available using the links below:
- FY 2017 Financial Statement Audit of the Temporary Corporate Credit Union Stabilization Fund (opens new window)
- Audit of the NCUA Closing Package Schedule of Other Assets and Contributed Capital (opens new window)
- December 2016 Corporate System Resolution Program Update Board Presentation (opens new window)
- December 2016 Board Presentation Prepared Remarks NGN Disposition Strategy (opens new window)
Additional information on the Share Insurance Fund equity ratio and normal operating level is available using the links below: