Oregon and Washington credit unions that invested millions in WesCorp after lobbying from the National Credit Union Administration (NCUA) are reeling following news that the agency will now force early redemption of the CDs at par.
Payment of the investments at par will result in the loss of millions of dollars in anticipated interest income.
The Oregon and Washington credit unions still hold more than $60 million in term certificates with WesCorp successor, which were not scheduled to mature until at least 2012.
“Two years ago, the NCUA pleaded with credit unions to keep their money invested in the corporate credit union system so there would not be a run,” said Association CEO John Annaloro. “It makes no sense that the reward for helping will be the loss of millions.”
The NCUA has been operating WesCorp and three other failed corporate credit unions as bridge corporates. WesCorp proposed to re-charter as United Resources Corporate Credit Union after its October, 2011 liquidation. Some but not all assets of WesCorp will be purchased by United Resources. The term certificates will not, and the NCUA made a decision not to pay out interest past WesCorp’s liquidation date.
The agency informed credit unions of the decision in a letter last week. “The NCUA will not transfer term certificates to United Resources at a premium as that will increase costs to the insurance fund,” Scott Hunt, Director of NCUA’s Office of Corporate Credit Unions, told members in the letter.
Hunt acknowledges the losses will be hard to swallow. “I know it stings, certainly, not to get the full interest,” he said in an interview with the Anthem. He stressed the decision was “fully vetted by the NCUA board.
“The credit unions are paying for this and expect a fair, firm, and first-class regulatory agency to provide examinations, supervision, and resolution,” the Association’s Annaloro countered. “This is not first-class management of the corporate resolutions. It seems there has been a string of miscalculations.”
The NCUA reports that 180 credit unions from around the nation invested in WesCorp CDs and estimates paying the interest income in full would result in a $15 million hit on the Share Insurance Fund. “We could not put that on the backs of the other 7,000 credit unions,” he noted.
Credit unions holding CDs in WesCorp can expect a check by late October paying off their CDs and interest accrued on the account, Hunt said.
Hunt added that another bridge corporate, US Central FCU, is also liquidating and the NCUA will also force early redemption of its term investments. Oregon and Washington credit unions did not invest in US Central term certificates. Southwest Corporate FCU is also re-chartering but will transfer its term certificates into its new charter, Catalyst.
Questions or Concerns? Contact the Anthem Editor: Editor@nwcua.org.