Office of Corporate Credit Unions Report
SHARE GUARANTEE PROGRAM COMING TO AN END
The final phase of the successful Corporate System Resolution
has begun. By the end of this year, all products and services
offered by conserved corporate credit unions will be
seamlessly transitioned to other providers—with no
interruption of service to members. In the meantime, all
ongoing corporate credit unions are meeting higher regulatory
standards for capital, investments, and governance.
“We have moved a great distance from the short-term priority
of ensuring liquidity of the corporate credit union system
during a time of severe market disruptions to entering the
final phase of its successful stabilization,” said NCUA Board
Chairman Debbie Matz. “We therefore are now confident in
moving forward without a government guarantee on all
corporate credit union deposits.”
The Temporary Corporate Credit Union Share Guarantee
(Share Guarantee) program will end, as previously scheduled,
on Dec. 31, 2012.
NCUA recently sent a Letter to Credit Unions as a reminder
about the upcoming end of the Share Guarantee. This article
provides brief responses to the most prominent questions
NCUA is now hearing from credit unions. More detailed
information to assist you in answering these or other
questions may be found at www.ncua.gov.
An explanation of the Share Guarantee in Corporate Credit
Union Guidance Letter 2009-01 may be found at
http://www.ncua.gov/Resources/Pages/LCCU2009-01.aspx.
For an explanation of the limits of insurance coverage, please
click http://www.ncua.gov/DataApps/Pages/SI-Tools.aspx.
The following questions are common in most discussions
with credit unions:
; Why Is the Share Guarantee Temporary?
; How Will Accounts Be Protected?
; What Should Credit Unions Do Now?
Why Is the Share Guarantee Temporary?
The Share Guarantee was designed as a temporary additional
level of protection for corporate credit union members beyond
the current $250,000 standard maximum share insurance
amount. The NCUA Board adopted the Share Guarantee in
March 2009 to remove uncertainty about the safety of deposits
in corporate credit unions at a time when liquidity and credit
concerns had adversely affected the entire marketplace.
The Share Guarantee preserved funding for an uninterrupted
flow of services to natural-person credit unions while NCUA
developed the corporate credit union resolution and reform
programs. Most importantly, the guarantee helped provide
an extended, stable period for NCUA to institute the new
corporate regulatory regime and achieve an orderly resolution
of the five conserved corporate credit unions.
How Will Accounts Be Protected?
All qualifying shares, including existing deposits and new
qualifying deposits, will remain fully covered under the Share
Guarantee until Dec. 31, 2012. When the Share Guarantee
expires on Jan. 1, 2013, NCUA coverage on deposits in
corporate credit unions will be limited to the standard
maximum share insurance amount of $250,000.
Here are three examples showing how NCUA coverage will
apply going forward:
; A credit union maintains $1,000,000 in an overnight
account at a participating corporate. Beginning on Jan. 1,
2013, the $750,000 above the standard maximum share
insurance amount will not be guaranteed or insured.
; A credit union presently has a $2,000,000 two-year share
certificate at a participating corporate, with a maturity of
June 30, 2013. The certificate is covered by share insurance
of $250,000, and the remaining balance of $1,750,000 will
be covered by the Share Guarantee through Dec. 31, 2012.
; A credit union plans to purchase a $5,000,000 one-year
share certificate at a participating corporate on May 15,
2012, with a maturity of May 14, 2013. The certificate
will be covered by share insurance of $250,000, and the
remaining balance of $4,750,000 will be covered by the
Share Guarantee through Dec. 31, 2012.
What Should Credit Unions Do Now?
Through this reminder, NCUA is providing credit unions who
conduct business with corporates ample time to evaluate their
current corporate account holdings. Before the Share Guarantee
expires, you should determine whether to make any
adjustments necessary to meet your credit union’s risk tolerance.
During this time, NCUA strongly encourages you to work
with your corporate to explore options that best meet your
credit union’s specific needs.
The expiration of the Share Guarantee at the end of this year
will mark the successful conclusion of a critical component in
the Corporate System Resolution. We will soon reach the
final milestone in returning the corporate system back to
normal business operations.
