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Agency’s Litigation Efforts Have Resulted in Nearly $4.8 Billion in Recoveries

ALEXANDRIA, Va. (May 1, 2017) – The National Credit Union Administration, on behalf of U.S. Central Federal Credit Union and Western Corporate Federal Credit Union, has received $445 million from UBS for claims arising from losses related to purchases of residential mortgage-backed securities by those corporate credit unions.

“This latest recovery, together with prior recoveries, has helped shield credit unions from greater Stabilization Fund assessments and provided a measure of accountability for the firms that sold faulty securities to the corporate credit unions,” NCUA Acting Board Chairman J. Mark McWatters said. “It remains incumbent on NCUA to provide transparency in terms of the settlements, the legal fees and other costs that go with them, and how these affect the Stabilization Fund.”

NCUA in April 2016 recovered $79.3 million from UBS for losses sustained by two other corporate federal credit unions, Members United and Southwest. NCUA’s recoveries from financial institutions the agency alleged sold faulty securities to five corporate credit unions, leading to their collapse, have reached nearly $4.8 billion.

NCUA was the first federal financial institutions regulator to recover losses from investments in these securities on behalf of failed financial institutions. Net proceeds from recoveries are used to pay claims against the five failed corporate credit unions, including those of the Temporary Corporate Credit Union Stabilization Fund.

The settlement covers claims asserted in 2012 by the NCUA Board as liquidating agent for U.S. Central Federal Credit Union and Western Corporate Federal Credit Union in federal district court in Kansas. In connection with the settlement, NCUA will dismiss its pending suit against UBS, which does not admit fault as part of the agreement.

NCUA still has pending litigation against various residential mortgage-backed securities trustees and LIBOR banks related to corporate credit union losses.

NCUA makes detailed information on its legal recoveries in cases related to the failure of the five corporate credit unions available online. The breakdown of the net recoveries posted on the webpage will be updated when information about fees and expenses is processed.

NCUA Recovers $400 Million from Credit Suisse

ALEXANDRIA, Va. (May 3, 2017) – Legal recoveries by the National Credit Union Administration on behalf of five failed corporate credit unions that purchased residential mortgage-backed securities have reached $5.1 billion, the agency announced today.

NCUA has received $400 million from Credit Suisse for claims arising from losses related to purchases of residential mortgage-backed securities by U.S. Central Federal Credit Union, Southwest Corporate Federal Credit Union, and Western Corporate Federal Credit Union.

“NCUA has pursued litigation for nearly six years with the aim of holding responsible parties accountable and reducing the burden of Stabilization Fund assessments on credit unions,” NCUA Acting Board Chairman J. Mark McWatters said. “As NCUA continues its efforts, we will strive to provide complete, easy-to-access information about the settlements, legal fees, and related costs of litigation. We will also continue to work to control the costs to credit unions of resolving the corporate credit union collapse.”

The Credit Suisse settlement covers claims asserted in 2012 by the NCUA Board as liquidating agent for the three corporate credit unions in federal district court in Kansas. NCUA will dismiss its pending suit against Credit Suisse, which does not admit fault as part of the agreement. In April 2016, NCUA received a judgment of $50.3 million, along with a $9.75 million award for attorney’s fees, in a separate suit against Credit Suisse in federal district court in New York.

NCUA was the first federal financial institutions regulator to recover losses from investments in these securities on behalf of failed financial institutions. As liquidating agent for five failed corporate credit unions—Western, U.S. Central, Southwest, Members United, and Constitution—the NCUA Board filed 26 complaints against 32 defendants in federal courts in New York, Kansas, and California. These include 20 suits over sales of securities NCUA alleged were faulty, two suits alleging violations of law based on manipulation of the London Interbank Offered Rate, and four suits alleging failure to fulfill trustees’ duties with respect to certain residential mortgage-backed securities trusts.

Net proceeds from recoveries are used to pay claims against the five failed corporate credit unions, including those of the Temporary Corporate Credit Union Stabilization Fund.

NCUA makes detailed information on its legal recoveries in cases related to the failure of the five corporate credit unions available online. The breakdown of the net recoveries posted on the webpage will be updated when information calculation and processing of fees and expenses are completed.

ALEXANDRIA, Va. (May 3, 2017) – Qualified credit unions interested in applying for consulting assistance from the National Credit Union Administration have until May 31 to submit nominations, the agency announced today.

Eligible credit unions should complete the agency’s online application form [link no longer available]. Credit unions can nominate themselves or be nominated by examiners from either NCUA or a state regulator. Each credit union can choose its top three requests from a menu of services. Credit unions chosen to participate will be assigned an economic development specialist to assist them.

To qualify for NCUA’s consulting assistance, a credit union must be in one of the following categories:

• Have total assets of less than $100 million,
• Have been chartered for fewer than 10 years,
• Be designated as a Minority Depository Institution, or
• Have a low-income designation from NCUA.

Credit unions not chosen may apply again in subsequent rounds.

NCUA’s Office of Small Credit Union Initiatives fosters credit union development and the effective delivery of financial services for small credit unions, new credit unions, minority depository institutions and credit unions with a low-income designation.

New Service, Available 24/7, Tailors Training to Credit Union Needs

ALEXANDRIA, Va. (May 8, 2017) – Credit union boards, staff and volunteers can connect more easily to essential training specific to their needs with a new portal provided by the National Credit Union Administration’s Office of Small Credit Union Initiatives.

The Learning Management Service, available here (opens new window), gives users access to training courses as well as information beneficial to credit union operations. The service, provided at no cost to credit unions, offers education in five categories:

• How the credit union system works,
• How credit unions are governed,
• Credit union operations,
• Products and services, and
• Building community partnerships.

Credit unions can watch a demonstration of the portal during a Facebook Live event hosted at Georgetown University Alumni and Students Federal Credit Union today at 2:00 p.m. Eastern. The live stream will be broadcast on NCUA’s Facebook page (opens new window).

The new Learning Management Service requires users to create an account to track their training progress. Users should view this brief tutorial video (opens new window) to learn more about creating an account and the service’s training categories.

NCUA plans to take user feedback and questions about the new Learning Management Service in an upcoming #NCUAChat. NCUA will announce more details in the near future.

The service is in its first phase of development. In time, new course materials will be added, so credit unions are encouraged to visit the new service often.

NCUA’s Office of Small Credit Union Initiatives fosters credit union development and the effective delivery of financial services for small credit unions, new credit unions, minority depository institutions and credit unions with a low-income designation.

ALEXANDRIA, Va. (May 17, 2017) – The video recording of the April 20, 2017, open meeting of the National Credit Union Administration Board is now available on the agency’s website.

Archived videos of past Board meetings may be viewed here, and each video remains on the site for one year.

At the April open meeting, the Board unanimously approved one item:

• A request from the Illinois Department of Financial and Professional Regulation to revise its member business lending rule to provide parity with NCUA’s rule.
  The Board also received briefings from the Chief Financial Officer on the performance of the National Credit Union Share Insurance Fund and the Temporary Corporate Credit Union Stabilization Fund.

NCUA posts these videos as part of the agency’s ongoing efforts to provide transparency and to allow those unable to attend Board meetings the opportunity to become better informed. An interval between the meeting and posting is necessary for the videos to comply with Section 508 of the Rehabilitation Act for the hearing and visually impaired.

The Board Actions page of NCUA’s website has more information, including Board agendas, which are posted at least one week in advance of each open meeting; copies of Board Action Bulletins, which summarize the meetings; copies of Board memorandums and other documents.

Approximately $2 Million Available; NCUA Hosting June 14 Webinar with Details

ALEXANDRIA, Va. (May 17, 2017) – Low-income credit unions interested in applying for Community Development Revolving Loan Fund grants can begin submitting applications on July 1, the National Credit Union Administration announced today.

An online application form, an explanation of grant requirements, and other information are available on NCUA’s website here. Through a competitive application process, NCUA’s Office of Small Credit Union Initiatives will determine credit unions’ eligibility and administer approximately $2 million to the most qualified applicants, subject to the availability of funds.

Funding Categories and Deadlines

Each credit union may apply for funding under one of three initiatives as well as a separate initiative to support outreach to people living in underserved communities:

• Leadership development (maximum grant $10,000)—Credit unions may use this grant to promote career development, management succession planning, diversity and inclusion training, or structuring essential employment positions.
• Digital services and security (maximum grant $7,500)—Credit unions can improve digital member services as well as cybersecurity and fraud prevention under this initiative. This grant can be used to offer services like remote deposit capture, digital payments and wallets, or mobile loan applications or to provide cybersecurity training or digital encryption.
• Small, low-income credit union capacity (maximum grant $7,500)—Credit unions with assets of less than $30 million may apply for funding under this initiative to address operational challenges such as upgrading technology systems for greater efficiency and improved operations. Applicants must fall under the $30 million asset limit.
• Underserved communities (maximum grant $25,000)—Each credit union may apply for a grant to support projects designed to reach people living in underserved communities.
  Applications for funding under the leadership development, digital services and security, and capacity initiatives must be received no later than July 31 at 3 p.m. Eastern. Applications for funding under the outreach to underserved communities category must be received no later than Aug. 31 at 3 p.m. Eastern.

June 14 Webinar Will Explain Application Process

NCUA will host a webinar on June 14 to discuss the grant initiatives and the application process. Registration is now available online here (opens new window).

Kathryn Baxter, program analyst with the Office of Small Credit Union Initiatives, will be joined by community development financial analysts Ikenna Nwankpa and Susan Carter to discuss the grants program.

Participants will use the registration link to log into the webinar, and they should allow pop-ups from this website. They can submit questions in advance at [email protected]. The email’s subject line should read, “CDRLF Grants.” Participants with technical questions about accessing the webinar may email [email protected]. This webinar will be closed captioned and then archived online here approximately three weeks following the live event.

The Office of Small Credit Union Initiatives administers the Community Development Revolving Loan Fund grants as part of its mission to foster credit union development and effective delivery of affordable financial services for small credit unions, new credit unions, minority depository institutions, and low-income-designated credit unions.

ALEXANDRIA, Va. (May 22, 2017) – In the wake of the “WannaCry” global ransomware attack, the National Credit Union Administration reminds federally insured credit unions to verify they have effective controls in place to prevent similar attacks.

NCUA provides credit unions with extensive information on protecting systems, cybersecurity preparedness, and ransomware defense strategies at its
Cybersecurity Resource Center.

The WannaCry attack hit more than 300,000 victims in more than 150 nations, disrupting critical infrastructure, like healthcare, in some countries. This attack paired malware designed to exploit known Windows vulnerabilities with ransomware to infiltrate and encrypt data on affected systems. Systems using supported versions of Windows with up-to-date security patches were not affected. Affected organizations with robust incident response and system backup practices were capable of recovering with limited impact. Strong basic cyber hygiene practices can prevent infection by most types of ransomware. 

This attack was designed to spread to new machines and systems and did not require a user to perform an action like opening an email attachment in order to spread the ransomware. Although the attack has so far had limited impact in the United States, NCUA expects to see similar and increasingly sophisticated attacks of this nature. That is why it is essential that federally insured credit unions validate their cyber defenses, especially those practices that can prevent attacks like WannaCry from affecting their systems in the future. 

ALEXANDRIA, Va. (May 23, 2017) – Twenty-five federally insured credit unions subject to civil monetary penalties for filing late Call Reports in the fourth quarter of 2016 have consented to penalties totaling $10,365, the National Credit Union Administration announced today.

In the fourth quarter of 2015, 22 credit unions consented to penalties.

Individual penalties ranged from $151 to $2,509. The median penalty was $253. The Federal Credit Union Act requires NCUA to send any funds received through civil monetary penalties to the U.S. Treasury.

A list of credit unions filing late in the fourth quarter of 2016 and agreeing to pay civil monetary penalties is available online here (opens new window).

The assessment of penalties primarily rests on three factors: the credit union’s asset size, its recent Call Report filing history, and the length of the filing delay. Of the 25 credit unions agreeing to pay penalties for the fourth quarter of 2016:

• Eleven had assets of less than $10 million;
• Nine had assets between $10 million and $50 million;
• Four had assets between $50 million and $250 million; and
• One had assets greater than $250 million.

Four of the late-filing credit unions had been late in a previous quarter.

A total of 41 credit unions filed Call Reports late for the fourth quarter of 2016. NCUA consulted regional offices and, when appropriate, state supervisory authorities to review each case. That review determined there were mitigating circumstances in nine cases that led to credit unions not being penalized. Another six credit unions received a requested waiver. One state-chartered credit union paid a penalty to its state regulator.

NCUA informed the remaining credit unions of the penalties they faced and advised them they could reduce their penalties by signing a consent agreement. NCUA also said it would initiate administrative hearings against credit unions that did not consent.

NCUA sends reminder messages about Call Report filing deadlines that include information on how to receive technical support to handle filing problems. The agency also has created an automated reminder email system that contacts credit unions that have not filed their Call Reports and confirms successful filing.

NCUA’s Office of Small Credit Union Initiatives has dedicated an Economic Development Specialist to assist small credit unions in filing Call Reports on time. Credit unions that would like assistance should send an email to [email protected]. NCUA also has produced a video (opens new window) describing how to file Call Reports.

Board Action Bulletin

Stabilization Fund Reports Continued Positive Net Position

ALEXANDRIA, Va. (May 25, 2017) – The National Credit Union Administration Board held its fourth open meeting of 2017 at the agency’s headquarters here today and unanimously approved three items:

• A proposed rule to provide greater transparency to members of federal credit unions when those credit unions are seeking voluntary mergers.
• A proposed rule to enhance due process and provide consistency with other federal financial institutions regulators in the supervisory appeals process.
• A proposed rule to provide uniform, comprehensive procedures to govern the agency’s regulatory appeals process.

The Board also received a briefing from the Chief Financial Officer on the performance of the Temporary Corporate Credit Union Stabilization Fund, which remains in a positive net position.

Proposed Rule Opens Up Member Communications in Voluntary Mergers

Members whose federal credit unions are seeking a voluntary merger would have better access to information about that merger and a longer period of time to consider their votes under a proposed rule (Parts 701, 708a, and 708b) approved by the NCUA Board.

The proposed rule would:

• Increase the required time for notice to members before a merger vote to at least 45 days;
• Require the merging credit unions to disclose all merger-related compensation for certain employees and officials of the merging credit union;
• Clarify the contents and format of the members’ notice to provide better information; and
• Create a member-to-member communications process similar that found in NCUA’s regulations covering credit union conversions to or mergers with banks.

Comments on the proposed rule, available online here (opens new window), must be received within 60 days of publication in the Federal Register.

Due Process in Supervisory Appeals Enhanced by Proposed Rule

Appeals of material, examination-related supervisory determinations would benefit from greater due process under a proposed rule (Part 746a) approved by the Board.

Changes in the appeals process under the proposed rule include:

• Expanding the number of material supervisory determinations that can be appealed to the agency’s Supervisory Review Committee;
• Creating an optional intermediate level of review before an appeal goes to the Committee; and
• Changing the nature and composition of the Committee.

Under the proposed rule, an appeal at any level would not affect, delay, or impede any formal or informal supervisory or enforcement action in progress. Likewise, it would not affect NCUA’s authority to take any supervisory or enforcement action against a federally insured credit union.

Comments on the proposed rule, available online here (opens new window), must be received within 60 days of publication in the Federal Register.

Appeals of Some Agency Decisions Improved under Proposed Rule

A proposed rule (Part 746b) approved by the NCUA Board would create a more uniform process for appealing certain program office decisions to the Board.

Several existing NCUA regulations provide a right of appeal, but these generally lack uniformity and may be confusing to parties who might seek to appeal an adverse decision to the Board. The proposed rule would bring these under a uniform set of procedures and would enhance due process for all parties.

Subject matters affected by the new rule would include chartering and field of membership, investment authority, conversions and mergers, creditor claims in liquidations, and share insurance determinations. Certain areas, such as formal enforcement actions, prompt corrective action, and material supervisory determinations, would be excluded from coverage under the proposed rule.

Comments on the proposed rule, available online here (opens new window), must be received within 60 days of publication in the Federal Register.

Stabilization Fund Holds Positive Net Position

For the quarter ending March 31, 2017, the Temporary Corporate Credit Union Stabilization Fund’s net position increased about $43.8 million to end at $1.6 billion.

The increase in the Stabilization Fund’s net position resulted from a $37.8 million reduction in the provision for insurance losses and $6.5 million in guarantee fee income during the first quarter. The reduction in the provision for insurance losses was due primarily to improvements in projected cash flows related to the legacy assets securing the NCUA Guaranteed Notes Program.

NCUA’s Chief Financial Officer briefed the Board on the Fund’s performance based on the best available preliminary and unaudited information. Earlier this year, KPMG LLP, the independent firm that audits the Stabilization Fund’s financial statements, issued an unmodified, or “clean,” audit opinion of the Fund for the seventh year in a row.

Future changes in the economy or the performance of the legacy assets securing the NCUA Guaranteed Notes are likely to change the value of the assets the agency can access. Based on current projections, NCUA expects no future Stabilization Fund assessments to credit unions.

Created by Congress in 2009, the Stabilization Fund has reduced the impact on credit unions of the costs of resolving the corporate credit union crisis. The Fund is scheduled to expire in 2021; however, the agency is studying the possibility of closing it sooner.

NCUA tweets all open Board meetings live. Follow

@TheNCUA (opens new window) on Twitter, and access Board Action Memorandums and NCUA rule changes at

www.ncua.gov. NCUA also live streams, archives and posts

videos of open Board meetings online.

Board Action Bulletin

The NCUA Board considered a Supervisory Review Committee Appeal, and two Supervisory Actions. All three items remain confidential at this time.

NCUA tweets all open Board meetings live. Follow

@TheNCUA (opens new window) on Twitter, and access Board Action Memorandums and NCUA rule changes at

www.ncua.gov. NCUA also live streams, archives and posts

videos of open Board meetings online.