Credit Union Insurer Proposes Premium

Faced with mounting losses, the national insurance fund for credit unions has been forced to impose a premium for the first time in seven years.

Pending a vote by the National Credit Union Administration board, credit unions will have to pay one-twelfth of 1% of funds on deposit to shore up the National Credit Union Share Insurance fund.

The premium, which is billed as a one-time charge, equals 8.3 cents for each $100 in deposits. It is relatively modest compared to the 23 cents that commercial banks pay the Federal Deposit Insurance Corp., a rate that has risen steadily in recent years.

Roger Jepsen, chairman of the National Credit Union Administration, announced the proposed step Monday in a speech to credit union executives in Orlando, Fla. Jepsen’s agency administers the share insurance fund, which covers shares--the equivalent of deposits--at 13,000 credit unions.

“Financially, a premium is the prudent thing to do now,” Jepsen said in his speech to the Defense Credit Union Council.

Without the assessment, the credit union insurance fund would lose $20 million to $30 million in the fiscal year that ends Sept. 30.

The fund, which earned $35 million in the last fiscal year, would eke out a profit of $5 million to $10 million this year with the aid of the 8.3-cent premium, according to NCUA projections.

Losses from three New England credit unions alone have drained the agency of about $120 million this year, out of total projected insurance losses of $150 million. In addition, the specter of more problems erupting in California has prompted the agency to levy the special one-time charge.

Even so, the fund, which protects $200 billion in deposits, is a long way from being broke. It currently holds about $420 million in equity, which translates into a coverage ratio of $1.23 for every $100 in insured deposits, down from from $1.25 earlier this year.