Wednesday, January 11, 2017

NCUSIF Annual Assessments

NCUA's robusterian capital market folks are always primly proud of their "market savvy" and economic forecasting talents - they view themselves as without peer! And, most folks agree with that assessment! [Sorry to use that word; it just slipped out...]  

Immersed in their interest rate risk bi-polarity and non-maturity share hysterics, these mavens of "make-it-up" encourage credit unions
Never at risk! 
to develop and adopt a similar "strategic vision". But, there is one difference in your strategic planning and theirs - you actually have to live with your results; the robusterians at the NCUA are not challenged with the burden of accountability. You pay for their antics! [Prepare to pay... and pay... and pay again!]

Here's a little matrix you can use to build a recurring NCUSIF assessment into your credit union strategic plan...

If national CU asset growth exceeds 2% annually,
 then fork over $100 million to NCUA for each percentage point growth above 2%. 

      National CU Growth Rate                    $$$ Assessment
                2%                                                $   0
                3%                                                $ 100 million
                4%                                                $ 200 million
                5%                                                $ 300 million
                8% (actual as of 9/30/16)             $ 600 million

(... repeat in 2018 and 2019!)

As discussed in the last post, the NCUA can't  pay its bills over the next few years and also maintain a 1.30% NCUSIF equity ratio.

Why? Because the NCUA has 1) a $300 million budget locked in by a union contract over the next few years, 2) the NCUA investment gurus have locked in NCUSIF investment earnings over the next few years at a rate of @2.00% (and claim they can't change their "strategy"!), and 3) the NCUA senior staff evidently can't stand to suggest that the 1.30% equity ratio target be temporarily lowered (and thereby perhaps admit the obvious - the failure of their "strategic foresight"?), until wiser thinking and rising rates can bail them out.

Why not
The NCUA Board has several excellent alternatives that would not require hundred million dollar assessments on credit unions.



1 comment:

Anonymous said...

Your favorite, all time best, NCUA not going to do a thing.

Is like ObiWan, congress is our "only hope".

Maybe you can enlighten them and they remove NCUSIF.