Emergency Mergers-Chartering and Field of Membership
The NCUA Board (Board) proposes to amend in its Chartering and Field of Membership Manual the definition of the term ``in danger of insolvency'' for emergency merger purposes. The current definition requires a credit union to fall into at least one of three net worth categories over a period of time to be ``in danger of insolvency.'' For two of the three categories, the Board proposes to lengthen by six months the forecast horizons, the time period in which NCUA projects a credit union's net worth will decline to the point that it falls into one of the categories. This will extend the time period in which a credit union's net worth is projected to either render it insolvent or drop below two percent from 24 to 30 months and from 12 to 18 months, respectively. Additionally, the Board proposes to add a fourth category to the three existing net worth categories to include credit unions that have been granted or received assistance under section 208 of the Federal Credit Union Act (FCU Act) in the 15 months prior to the Region's determination that the credit union is in danger of insolvency.
Closing the Temporary Corporate Credit Union Stabilization Fund and Setting the Share Insurance Fund Normal Operating Level
The NCUA Board (Board) is considering closing the Temporary Corporate Credit Union Stabilization Fund (Stabilization Fund) in 2017, prior to its scheduled closing date in June 2021. Closing the Stabilization Fund and distributing all assets, property, and funds to the National Credit Union Share Insurance Fund (Share Insurance Fund) will increase the Share Insurance Fund's equity ratio and allow for the return to insured credit unions of any equity above the normal operating level. The return of excess equity would be accomplished through a distribution from the Share Insurance Fund in conformance with the Federal Credit Union Act (the Act). However, given the nature of certain assets and liabilities of the Stabilization Fund, the Share Insurance Fund's assumption of these assets and liabilities will introduce additional risk of volatility to the Share Insurance Fund's equity ratio. Therefore, the Share Insurance Fund would need to hold sufficient equity to cover potential changes in the value of its claims on the failed corporate credit union asset management estates. In addition, the Share Insurance Fund needs to have enough equity to cover other risks to the equity ratio, such as losses on insured credit unions, under the same macroeconomic conditions that create volatility in the asset management estate values. To ensure the Share Insurance Fund has sufficient equity to absorb these risks, the Board proposes to raise the normal operating level to 1.39 percent. This notice provides a discussion of the reasons the Board is proposing to close the Stabilization Fund in 2017 and the basis used to determine the normal operating level necessary to account for the additional risk to the Share Insurance Fund. In addition, the notice sets forth a new policy by which the Board would set the normal operating level. The Board solicits comments on each of these proposed actions.
Corporate Credit Unions
The NCUA Board (Board) proposes to amend its regulations governing corporate credit unions (corporates) and the scope of their activities. Specifically, the proposed amendments revise provisions on retained earnings and Tier 1 capital.