Recently, the NCUA sent a letter to credit unions reminding them of the expiration of the Temporary Corporate Credit Union Share Guarantee Program. This program, scheduled to end on December 31, 2012, was implemented by the NCUA in 2009 to eliminate uncertainty about the safety of deposits in corporate credit unions during the financial crisis. The NCUA states its reasons for ending the program in its March 2012 letter to credit unions: “Now that the corporate credit union system is sustaining stable operations, we can confidently move forward without a government guarantee on all corporate credit union deposits.”
When the share guarantee expires on January 1, 2013, NCUA insurance on deposits in corporate credit unions will be limited to the standard maximum share insurance amount of $250,000 covered by the NCUSIF.
Now that the share guarantee program is officially ending, credit unions should understand the NCUA’s changes to Rule 704 for corporate credit unions and monitor SunCorp’s financial position.
The NCUA made many changes to Rule 704 that became effective October 21, 2011. These changes to the rule were made to reduce the systemic risk that corporate credit unions had on the system. These rule changes, now in effect, make corporate credit unions safer financial institutions than they had ever been in the past. These changes include, but are not limited to:
- Requiring twice the minimum capital ratio as before
- Requiring minimum income ratios
- Disallowing investment in private label Mortgage Backed Securities
SunCorp is in excellent financial condition with a very strong capital level. As of January 31, 2012, SunCorp has the 3rd highest Tier 1 Capital Ratio of the 16 remaining corporate credit unions at 8.28% with $105.5 million in total regulatory capital. Since the end of November 2011, SunCorp has added 21 new members and 6 returning members who have invested additional Perpetually Contributed Capital (PCC) of $6.9 million.
Since the NCUA Share Guarantee Program was implemented, SunCorp staff has actively reminded members of the share guarantee expiration prior to investment of term certificates with maturities beyond December 31, 2012. However, many SunCorp members feel comfortable making these investments because they have confidence in SunCorp. As of March 31, 2012, SunCorp members held term certificates with maturities past the share guarantee expiration date totaling over $24.9 million.