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International CUs gird against financial turmoil
MADISON, Wis. (10/16/08)--With International Credit Union Day here, it is noteworthy that British, Japanese and New Zealand credit unions are gearing up to ensure safety against global financial troubles. The New Zealand Association of Credit Unions endorsed the inclusion of credit unions Tuesday in a national deposit guarantee plan ( Oct. 13). Because of New Zealand credit unions “sound business operation,” 170,000 member depositors will be given the same commitment from the government as those given to banks, Doug McLaren, chief executive, New Zealand Association of Credit Unions, told the newspaper. The Japanese government and ruling parties have decided to create an emergency funding mechanism geared to bolstering smaller lenders balance sheets through preventive injections of public funds. The move started in response to small and midsize financial institutions in the U.S. being negatively impacted by financial turmoil, the government said (Nikkei Report Oct. 10). The government is considering an infusion of 10 trillion yen [nearly $99 billion] with potential recipients being credit unions, Shinkin banks and second-tier regional banks, the paper said. [Shinkin banks are cooperative regional financial institutions serving small and medium enterprises and local residents. Anyone who lives, works, or has an office in the region served by the bank can become a member. However, companies with over 300 employees are prohibited from membership.] The plan will be drafted into legislation and likely finalized later this month, as it is incorporated into the Japanese government’s second economic stimulus package. Currently, a regional financial institution can qualify for funding if its failure would pose a threat to available credit in the region. This has led to demands for a safety net for financial institutions that are too little to meet this condition, the paper said. British credit unions are safe from the turmoil afflicting many other financial institutions, according to the Association of British Credit Unions, Ltd (Express and Echo Oct. 14). Mark Lyonette, the association’s chief executive said in a statement: “As credit unions do not rely on borrowing from other banks or the international money markets, and are not in the business of buying up the debts of the financial institutions, they are well sheltered from the economic turmoil that is causing worry for so many people at the moment. “Credit unions use the savings of their members to make loans to other members,” he added. “Savings in credit unions are covered by the Financial Services Compensation Scheme.” [The Financial Services Compensation Scheme (FSCS) is the UK's statutory fund of last resort for customers of authorized financial services firms. This means that FSCS can pay compensation if a firm is unable, or likely to be unable, to pay claims against it. FSCS is an independent body, set up under the Financial Services and Markets Act 2000.]
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