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The National Credit Union Administration (NCUA) has released the frequently asked questions (FAQs) listed below regarding the Pacific Investment Management Company LLC (PIMCO) analysis of corporate credit union residential mortgage backed securities (RMBS) and NCUA’s conservatorship of U.S. Central and Western Corporate Federal Credit Unions.
NCUA placed U.S. Central and WesCorp into conservatorship to conserve the credit unions’assets and to protect the Share Insurance Fund and the interests of the members. NCUA took control to: reduce the systemic exposure given the estimated loss projections in both corporate credit unions; exert greater direct control over and improve the transparency of financial information; and maintain the confidence of member credit unions and payment system counterparties given the expected losses and credit rating downgrades.
The NCUA Board requested PIMCO perform an analysis of corporate credit union RMBS in order to receive an independent, objective assessment of potential losses resulting from holding the securities to maturity and to verify NCUA’s reserve methodology for calculating the credit union premium to recapitalize the National Credit Union Share Insurance Fund.
NCUA obtained an independent review because:
- The portfolios with RMBS have highly complex structures that require considerable expertise to model and analyze.
- The growing amount of unrealized losses on investment securities and the troubling amount of rating downgrades compelled NCUA to independently determine the amount of expected credit impairment.
- NCUA developed concerns about the portfolio management abilities of the largest corporate credit unions and did not want to rely solely on the institutions’ own analyses.
Media talking points are also included below.
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