Credit Union Journal Daily Briefing | Monday, September 27, 2010
ALEXANDRIA, Va. – NCUA, which a year ago had pegged the cost of the corporate credit union bailout at approximately $7 billion, last week said the projected cost to credit unions has escalated to as much as $16.1 billion.
The latest price tag, which will be paid by natural-person credit unions over as long as 12 years, includes $5.5-billion of corporate credit union capital eliminated by losses in the corporate system and $1.3 billion already paid by credit unions last year and this year as a so-called stabilization assessment. That leaves credit unions looking at a bill of some $9 billion moving forward.
The much larger corporate bailout expenses come as credit unions are expected to make annual payments to replenish the reserves in the National CU Share Insurance Fund, which are being depleted by growing losses among natural-person credit unions. NCUA has charged credit unions more than $2 billion last year and this year to replenish NCUSIF reserves and has projected additional charges for the next few years.
The continuing costs are projected to push thousands of credit unions into the red, force dozens to fail and accelerate the pace of mergers that has slowed over the past three years. In addition, while NCUA Chairman Debbie Matz insisted Friday that no member will lose any of their insured credit union deposits, many will be driven away from their credit union by the lower rates credit unions will be forced to pay on their deposits.