Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

News Now

Washington
CDCUs call for stabilization funding options
WASHINGTON (2/11/09)—The cost and structure of federal regulators’ current plan to stabilize corporate credit union liquidity could wreak havoc on community development credit unions (CDCUs), according to a national group representing those low-income credit unions. The National Federation of Community Development Credit Unions (Federation) said this week that CDCUs are concerned that the plan could result in reduction of their services, loss of staff, and “the outright demise of many low-income credit unions.” Writing to the National Credit Union Administration (NCUA) about its intention to fund its corporate stabilization plan by assessing a share insurance premium, President/CEO Clifford Rosenthal of the Federation said his members recognize the gravity of the corporate’s situation. However, he argued that CDCUs are particularly vulnerable to the cost of the NCUA’s plan because they serve “those hardest hit by the recession…people who under the best of circumstances have meager financial reserves, few resources, and limited access to affordable credit from the banking system.” The Federation said it favors allowing corporate credit unions to access the Cental Liquidity Facility (CLF) directly but suggested better solutions may yet be devised. According to Federation analysis, under the NCUA’s funding plan:
* Approximately 62% of CDCUs would have negative income in 2009; and * An estimated 18% would fall below the “well capitalized threshold of 7% net worth, while 10.1% would fall below the “adequately capitalized” threshold of 6%.
“While the economic impact of the NCUA proposal is not unique to CDCUs, damage that would be sustainable for other credit unions could prove irreparable or fatal for many CDCUs,” Rosenthal wrote. “Unless and until a better solution can be devised – one that can avoid the harm to low-income and small credit unions -- the Federation supports the effort to allow corporate credit unions to access the Central Liquidity Facility directly,” Rosenthal wrote. The Federation maintained that the lack of access to the CLF seems “an anomaly that can no longer be sustained.” “Infusing funds into the corporates directly from the CLF is a wholly appropriate use of the federal financing system, and is likely to prove far more effective than the indirect method that NCUA has employed recently,” he added. The Credit Union National Association (CUNA) has underscored that the credit union system must pursue a range of viable solutions to address the corporate credit union problem. (See related story: Mica tells CUs range of solutions needed on corporates) CUNA recognizes a legislative solution centered on the CLF is one possibility, but advises that it is necessary to look at whether a regulatory as well as a legislative solution would address the problem. Use the resource link below to access a compilation of CUNA corporate credit union information.


RSS print
News Now LiveWire
July 's Fed Bank's "FedFocus" has some interesting articles: incl cost/benefits of $1 currency 2 coin conversion ttp://tinyurl.com/nybmnhh
13 hours ago
Do you wish you were a News Now subscriber? Go here: http://t.co/7evfBSjeMx
13 hours ago
Financial education for student body key part of Altura #creditunion, UC-Riverside partnership #NewsNow http://t.co/Xp6OJd66o6
14 hours ago
.@VTcreditunions gains 200 new FB followers in just 2 wks to reach 1,000 http://t.co/I89xJcv4Jg
15 hours ago
.@CUNA is testifying on reg relief Tues,July 15 at 2 p.m. be4 Hs Fin Serv Subc. Here is the agenda and witness list: http://t.co/yBRhlmdqHt
17 hours ago