Corporate Credit Unions Focus of New Study

Report Urges NCUA to Emphasize Finances, Risk Management Liquidity, capital, structure and risk management - these are the issues that must be addressed by the National Credit Union Administration (NCUA), according to a new independent study.

The NCUA, as part of its major strategic realignment of the corporate credit union system, hired consulting firm PricewaterhouseCoopers (PwC) to review and recommend issues surround the realignment. The analysis of the PwC study was released last week.

Working with the NCUA, the Government Accountability Office (GAO) and studies by other consulting companies, PwC issued a confidential report to the NCUA board. The summary of the report identifies good practice models from throughout the industry and recommends proposed actions in the four aforementioned areas to address the corporate system's needs.

Specifically, the PwC report says:

A strong center for payment systems and other specialized services is needed within the credit union system;

The number of corporates should be justified by economies of scale and prudential considerations;

Payment system activities should be distinguished and insulated from non-payment system activities to minimize systematic risk;

Corporates should be well-capitalized;

Well-defined risk management standards and governance infrastructure are necessary to sustain corporates' systemic role;

Investment risk should be borne by the ultimate owners.

Click here to read the full summary.


"The report augments existing information and serves to validate staff evaluations that the Board will use, along with comments received from the advance notice of proposed rulemaking, when considering whether to amend its regulation governing corporate credit unions," said the NCUA board in a joint statement about the PwC study.

This report comes at a time of turmoil within the credit union industry, as illustrated by NCUA's Chairman Michael Fryzel's observation, "There are problems, but also solutions, if we work together" to deal with the proposed regulations, national policy issues and compliance and examination challenges facing the industry. Fryzel's comments were made at the NCUA/NASCUS National Regulators Conference in Chicago, IL on March 9.

The National Association of Federal Credit Unions (NAFCU) also reacted to the report, "We are pleased to see that the summary of the PriceWaterhouseCoopers on NCUA's plans to stabilize and realign corporate credit unions includes a recommendation to use the Central Liquidity Facility to infuse liquidity into the system an approach NAFCU has publicly urged in official comments to NCUA and members of Congress," says NAFCU President Fred Becker.

Becker notes, "In addition, the report suggests implementation of risk-based capital, something that NAFCU has also advocated for some time."

NAFCU says it is currently compiling comments from its members in response to NCUA's advance notice of proposed rulemaking on the corporate credit union system. NAFCU will submit its comments by NCUA's deadline of April 6.

About the Author

Linda McGlasson

Linda McGlasson

Managing Editor

Linda McGlasson is a seasoned writer and editor with 20 years of experience in writing for corporations, business publications and newspapers. She has worked in the Financial Services industry for more than 12 years. Most recently Linda headed information security awareness and training and the Computer Incident Response Team for Securities Industry Automation Corporation (SIAC), a subsidiary of the NYSE Group (NYX). As part of her role she developed infosec policy, developed new awareness testing and led the company's incident response team. In the last two years she's been involved with the Financial Services Information Sharing Analysis Center (FS-ISAC), editing its quarterly member newsletter and identifying speakers for member meetings.

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