CUs Brace For Next Hit From NCUA

Credit Union Journal Daily Briefing  |  Wednesday, April 28, 2010

WASHINGTON – Credit unions around the country are starting to set aside reserves for what they expect will be another large assessment from NCUA later this year – maybe as much as $4 billion to pay costs associated with the ongoing corporate bailout and for the failure of several large credit unions.

NCUA has warned credit unions it expects to follow up last year’s $1.1 billion assessment, or 15 basis points, with an assessment of between 15 bps to 40 bps this year, which could amount to as much as $4 billion. Last year’s assessment forced many marginally profitable credit unions into the red for the year, with half of all credit unions reporting losses for 2009.

NCUA is expected to set a definitive assessment later this summer after it has better information on the costs of natural person credit union failures, which it will combine with the growing costs of the corporate bailout.
NAFCU’s Wai recommended that credit unions having a difficult year begin to establish a reserve as early as possible. “If you are in a situation that your earnings are not so great you need to set aside some reserves so when the bill comes due you’re ready, kind of like a prepayment plan,” he told Credit Union Journal.