Corporate Credit Unions Placed Into Conservatorship

NCUA framework resolves financial challenges of corporate credit unions without disrupting consumer service

 

September 24, 2010, - The National Credit Union Administration today assumed control of three undercapitalized corporate credit unions, announced a plan to isolate the impaired assets in the corporate credit union system, and finalized a set of stronger regulations - key elements in its efforts to resolve the financial challenges facing corporate credit unions without disrupting consumer service.

 

Setting the plan into motion required conservatorship today of three corporate credit unions that are not viable: Members United Corporate Federal Credit Union  (formerly Mid-States Corporate) of Warrenville, Illinois; Southwest Corporate Federal Credit Union of Plano, Texas; and Constitution Corporate Federal Credit Union of Wallingford, Connecticut.

 

In 2009, two other corporate credit unions were placed into conservatorship: U.S. Central Corporate Federal Credit Union of Lenexa, Kansas, and Western Corporate Federal Credit Union of San Dimas, California. 

 

In a conservatorship, NCUA replaces an institution's management and board, operating it in a way that protects taxpayers' and members' interests during its orderly transition and resolution.

 

NCUA will isolate and fund a total of almost $50 billion in troubled (legacy) assets held by the five corporate credit unions. Isolating legacy assets prevents the need to sell them at severely distressed prices. Securitizing and giving them a U.S. government guarantee and then selling them to investors on the open market (facilitated by Barclays Capital, New York, New York) will provide financial resolution.

The proceeds raised by their sale will fund the legacy assets. This key component of the resolution will help ensure NCUA resolves the situation at the lowest possible cost, consistent with sound public policy.

 

NCUA is committed to ensuring no disruption in corporate payment system processing. It will use "bridge corporates" to facilitate an orderly transition of the operations of the five institutions. Overall the credit union system remains strong. Credit unions, not taxpayers, will fund all costs associated with the corporate credit union system solution. 

 

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