Director’s Report:
Office of Examination and Insurance
CREDIT UNION BUDGET GUIDANCE
NCUSIF Premium and
Stabilization Fund
Assessment Forecast
The NCUA Board recently
announced the 2012 forecast
for both the NCUSIF
premium and Stabilization
Fund assessment. These
forecasts provide federally
insured credit unions with
guidance for budget and cash
management purposes, but forecasts should not be accrued
for or expensed by credit unions until subsequently declared
by the Board. NCUA considers a number of variables to
develop the forecasts and carefully analyzes the impact of the
premiums and assessments on federally insured credit unions.
Larry Fazio
Director
Office of Examination
and Insurance
the projected dollar amount of losses associated with failures
(the loss given default), and trends in CAMEL codes,
projected net NCUSIF income, and growth in insured shares.
Using these factors, our scenario analysis indicates a projected
equity ratio range of 1.24 percent to 1.32 percent for the end
of 2012. The current trend of a reduction in the number of
credit union failures and the number of CAMEL codes 3, 4,
and 5 rated credit unions suggests a 2012 premium may be
unnecessary. A reversal, however, in these key trends or a very
large anomalous event may cause the equity ratio to end
lower or below the projected range and result in the need of
a NCUSIF premium.
Stabilization Fund Assessment for 2012:
Projected Range of 8 to 11 Basis Points
NCUSIF Premium in 2012:
Projected Range of 0 to 6 Basis Points
The NCUSIF equity ratio at the end of November stood at
1.32 percent. The equity ratio of the NCUSIF is strong and
has risen due to lower than budgeted insurance loss expense,
and it is above the normal operating level of 1.30 percent.
Since the launch of the Corporate System Resolution program
in September 2010, NCUA has communicated that
Stabilization Fund assessments will be higher in the initial
years as we work to meet the cash needs associated with
establishing the NCUA Guaranteed Note (NGN) Program,
manage borrowings from the United States Treasury, and
stabilize the corporate system going forward. Total
assessments through 2011 equal $3.3 billion.
In January, NCUA will determine the NCUSIF equity ratio
as of Dec. 31, 2011. If the equity ratio remains above 1.30
percent at year-end, the law requires NCUA to transfer the
equity above 1.30 percent to the Stabilization Fund to offset
corporate resolution costs and cash needs.
While Bank Transfer Day gained a significant level of public
attention, staff also considered the impact of higher than
normal insured share growth in the fourth quarter of 2011,
which would affect the equity ratio. NCUA will determine
the growth in insured shares for the last quarter of 2011 by
the end of February, after processing year-end Call Reports.
However, staff analysis has determined that abnormal share
growth of three to four times the national average would
have to occur to bring the ratio down to below the normal
operating level. Therefore, NCUA anticipates beginning
2012 with an equity ratio of 1.30 percent. Again, any
equity above 1.30 percent would be transferred to the
Stabilization Fund.
To determine the projected 2012 NCUSIF premium of 0 to 6
basis points, NCUA considered a range of frequencies of
natural personal credit union failures (probability of default),
To establish the projected 2012 assessment for the
Stabilization Fund of 8 to 11 basis points, NCUA considered
the required repayment of $3.5 billion in medium-term notes
issued by corporate credit unions and guaranteed by NCUA
along with available borrowing authority and interest
expense associated with the borrowings. Other factors
include other sources of funds, such as the timing of
monetization of remaining assets within the Asset
Management Estates, transfer of funds from the NCUSIF if
the equity ratio exceeds the normal operating level, and
recoveries from legal actions. To meet the cash needs of the
Stabilization Fund in 2012, the projected assessment ranges
from 8 to 11 basis points.
NCUA will continue to reevaluate and closely monitor issues
affecting the need for any NCUSIF premium and future
Stabilization Fund assessments in an effort to reduce the costs
to federally insured credit unions.
If you have questions about either the projected 2012
NCUSIF premium or Stabilization Fund assessment, please
contact the Office of Examination and Insurance at
email@ncua.gov.
