United States: NCUA Board Approves Corporate Stabilization Efforts

On January 28th, the National Credit Union Administration ("NCUA") announced a program under which it will temporarily guarantee $80 billion in uninsured member shares or deposits at wholesale or corporate credit unions [http://www.ncua.gov/news/press_releases/2009/MR09-0128.htm]. Uninsured shares are generally those in excess of the Standard Maximum Share Insurance Amount on the date of a particular corporate credit union's liquidation, which amount is currently $250,000. Corporate credit unions provide investment, liquidity and clearinghouse services to consumer-owned "retail" credit unions. Credit union deposits are insured by the National Credit Union Share Insurance Fund ("NCUSIF"), a fund overseen by the NCUA. The temporary guarantee will apply to member shares in all corporate credit unions through February of 2009 and will extend on a voluntary or "opt-in" basis to corporate credit unions through December 31, 2010. A Fact Sheet for the program is available at the NCUA's website [http://www.ncua.gov/CoporateStabilizationProgram/E-ShareGuaranteeTermsNotice_1-26-09.doc]. The program is an extension, but not a replacement, of the NCUA's Corporate Credit Union Guarantee Program [http://www.ncua.gov/news/press_releases/2008/MA08-1016.htm] announced on October 16, 2008, under which the NCUA provides NCUSIF-insured corporate credit unions with a 100 percent guarantee on new unsecured debt obligations, subject to terms detailed in the program.

Simultaneous with this announcement, the NCUA (i) injected $1 billion of capital into US Central Corporate Federal Credit Union of Lenexa, Kansas, which reported a $1.1 billion loss for 2008 [http://www.ncua.gov/CoporateStabilizationProgram/CapitalNoteTerms.doc]; (ii) issued an Advance Notice of Proposed Rulemaking to restructure corporate credit unions; and (iii) declared a 2009 premium assessment to restore NCUSIF's equity ratio to 1.30 percent.

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