National Credit Union Administration (NCUA) Chairman Michael E. Fryzel issued a Letter to Credit Unions recently to remind credit unions that the Central Liquidity Facility (CLF) is an available resource for contingent liquidity during the current market turbulence.

 

"The CLF has a total of approximately $41.5 billion available to meet back-up liquidity demands, appropriated by Congress and administered by NCUA. Credit unions should carefully monitor liquidity and if necessary, utilize the CLF on an as-needed basis," Fryzel stated in the letter, which is also posted on the NCUA website.

 

The CLF lends to credit unions that are creditworthy and demonstrate liquidity needs. A credit union generally is deemed creditworthy if it is a viable operation. Three forms of loans available through the CLF are:

Credit unions can apply for a CLF loan either through a corporate credit union or as a regular member, the NCUA said in a release.

 

 

Advanced Operational Issues: Account Insurance Coverage and Operations and Payment System Issuesscheduled for Tuesday, November 4, at the Doubletree Hotel in Westborough, MA has expanded the insurance section, Part I of the agenda to address the new paradigm on insurance coverage. Attorney Ty Parker will discuss the training, promoting, assisting, and calculating issues associated with the changes to existing insurance coverage rules.

There are a number of new changes to the National Credit Union Share Insurance Fund (NCUSIF) rules, which compound the confusion in understanding all the existing rules! This program will address all the new changes and explain how they apply to the existing rules. Attendees will receive materials and explanations written and discussed in plain English, the tools to develop your own credit union’s training program and promotional material that succinctly explain NCUSIF coverage. Attendees will learn to calculate a member’s current and potential maximum coverage and gain the knowledge and understanding to shine in the face of member questions and uncertainty.

 

Click here to register for Advanced Operational Issues: Account Insurance Coverage and Operations and Payment System Issues and to learn more about the Advanced Operational and Payment System issues that will also be covered. https://www.signup4.net/Public/ap.aspx?EID=CUCE171E.

 

 

The two biggest news items to come out of the recent National Credit Union Administration (NCUA) open meeting were the presentation to the board of the third quarter share insurance fund report and the board's removal of its "underserved areas" proposal from the agenda.

 

At the Thursday (10/16) meeting, NCUA Chief Financial Officer (CFO) May Ann Woodson reported that the National Credit Union Share Insurance Fund's (NCUSIF's) third-quarter equity ratio is 1.28%. She projected the ratio to remain at that level each of the remaining three months of the year. If accurate, that would preclude a possibility of an NCUSIF dividend to federally insured credit unions, but would also mean that no premium would be required.

 

Woodson also reiterated for the agency that the recent, temporary statutory increase in share insurance coverage to $250,000 will not affect any decision as to whether a premium will be required.

 

The insurance report noted that while the increase in the number of credit unions earning the riskier CAMEL 4 and 5 ratings was not dramatic for 2008, the level of total shares represented by those credit unions jumped sharply. As of September 30, the NCUA reported 246 CAMEL Code 4/5 credit unions, compared to 211 for 2007. However, the percentage of shares to total insured shares in these lower-ranked credit unions jump to 2.08%--doubling the 1.04% year-end 2007 figure.

 

The NCUSIF report also noted that the total insurance loss expense for 2008 is projected to be approximately $152 million, with the agency expecting an additional $13.5 million in losses between September and year end.

 

The NCUA CFO traditionally makes a public accounting of NCUSIF before the NCUA board on a quarterly basis. Chairman Michael Fryzel asked Woodson to prepare to report monthly until the end of the year. Additionally, the chairman asked his CFO to prepare an additional slide to her presentation, one which would provide clearer information regarding insurance loss expense. Currently, the NCUSIF report described losses as zero for years when there were losses, but those losses simply brought down the reserve balance since the fund was over reserved for those years. For accurate comparison, Fryzel asked for historical NCUSIF realized loss amounts, in addition to loss expense.

 

Regarding the proposal intended to clarify "underserved areas," an NCUA spokesman said the proposal was removed from the agenda because it is still under consideration; it has not yet been rescheduled for action. Fryzel said at the beginning of the meeting that the agency was continuing its work on the plan to determine if there are ways to "make it better for credit unions."

 

The proposal was issued for comment last summer by the NCUA. It is intended to clarify the procedure for establishing that an "undeserved area" qualifies as a local community; address the application of economic distress criteria; and clarify requirements for showing an area has "significant unmet needs," including the use of data from NCUA and other agencies to analyze whether an area is "undeserved by other depository institutions."