CCUL Headlines: Regulatory

CU input requested on Corporate CU Stabilization Fund, NCUSIF equity distribution

Thursday, August 17, 2017   (0 Comments)
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To fully represent the views of member credit unions, the Carolinas Credit Union League is seeking credit union comments on the NCUA’s proposed changes to NCUA Regulation Part 741: Requirements for Insurance and the Temporary Corporate Credit Union Stabilization Fund.

Responses to the questions below should be emailed to CCUL VP, Compliance & Regulatory Counsel Jeanne Couchois at jcouchois@carolinasleague.org. The deadline to submit responses to the League is Monday, August 28.

 

1. NCUA believes the purpose of the Stabilization Fund has been fulfilled, and on July 27, 2017, the agency published a Notice for Comment announcing their intention to close the fund and transfer all the assets to the National Credit Unions Share Insurance Fund (NCUSIF). If closed, the NCUSIF’s equity ratio would increase and allow for any equity above the normal operating level to return to insured credit unions. However, the agency is proposing to raise the normal operating level to 1.39% (currently 1.3%).

Question: Assuming the fund is closed, should NCUA raise the normal operating level to 1.39% to cover the potential changes on the transferred assets? Please explain.

 

2. On August 1, 2017, NCUA issued a proposed rule to amend §741 to provide federally-insured credit unions (FICUs) with greater transparency regarding the calculation of a FICU's proportionate share of a declared equity distribution from the NCUSIF. See CUNA’s summary.

In an effort to make equity distributions more transparent, the agency is proposing to use the four quarter averages of insured shares method. This method uses the average of the four quarter-end insured share balances reported on the FICU's call reports during the calendar year to an NCUSIF equity distribution. NCUA considers this method the most equitable because it captures the seasonal fluctuations of insured shares. However, the agency also requests comments on using a year-end insured share balance method.

Question: Should the agency change the method used to calculate a credit union’s equity distribution? If yes, which method should NCUA use to calculate a credit union’s equity distribution, average insured share balance or year-end insured share balance?

 

3. The agency also proposes to add a temporary provision (§741.13) declaring any NCUSIF equity distributions for calendar years 2017-2021 to be a direct result of closing the Stabilization Fund. NCUA requests comments on whether the equity distributions should be made on a FIFO (first-in, first out) or LIFO (last-in, first-out) method.

Under the FIFO approach, NCUA would make an equity distribution to each FICU up to the total dollar amount of the FICU’s corporate assessments beginning with the first assessment period in 2009. Under the LIFO approach NCUA would make an equity distribution to each FICU up to the total dollar amount of the FICU’s corporate assessments beginning with the last assessment period. NCUA prefers the LIFO method but requests comments on both.

Question: Which method should NCUA adopt, FIFO or LIFO? Why?

 

If you would like to discuss the proposed rule in more detail, please reach out in reply to jcouchois@carolinasleague.org or call 919-457-9065.

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