The industry's largest trade group has drafted a plan that would let it monitor how the industry's liquidity centers invest credit unions' money. But at least some corporate credit unions are calling the idea a power grab.
The Credit Union National Association, spurred by the collapse of Capital Corporate Federal Credit Union, wants to certify those corporates that operate as matched-book, "absolutely safe" liquidity centers.
"We are not trying to preempt the National Credit Union Administration and Congress as they review the need for additional controls on the corporate network," CUNA president Ralph S. Swoboda wrote in a draft of the proposal. "Nevertheless, we believe (we) have an independent obligation to monitor corporate credit union safety and soundness."
Under the plan, which is still being developed, the trade group could decide to set up a seven-member committee that would establish investment criteria for corporates. Institutions that comply with the guidelines would be assured of being bailed out by other corporates if they run into problems. Corporates that don't comply would be on their own.
The committee would monitor the corporates to make sure they were complying. If a corporate breached the standards, its certification would be lifted.
CUNA's proposal has split the corporates.
Opponents argue that the trade group is trying to extend its influence over corporates in the wake of an NCUA rule that will end shared management between the association and the liquidity centers.
"I think they're very, very concerned they'll lose control of the corporates," said Raymond Dowling, chief executive of Constitution State Corporate Credit Union, Wallingford, Conn. "It's ludicrous to have a trade association make a judgment" on a corporate.
Jane Sansone, chief executive of Eastern Corporate Federal Credit Union, Woburn, Mass., promised to "take a look at what CUNA has to present." But Ms. Sansone added: "We're not attaching much importance to it."
James Taylor, president of Southeast Corporate Federal Credit Union, Tallahassee, Fla., said impending NCUA rules to tighten corporates' investments would render the CUNA proposal irrelevant. He said he doubted CUNA certification would happen.
Other officials argued that the Cap Corp debacle is evidence that something along the lines of CUNA's plan is needed.
"Voluntary regulation of activities by corporate credit unions has been attempted for a number of years, and it hasn't succeeded," said Michael J. Mercer, chief executive of the Georgia Credit Union League and of Georgia Central Credit Union. "Most people consider it as unfortunately necessary," he said of CUNA's certification program.
"I think credit unions deserve to know which corporates are adhering to the appropriate policies and guidelines we all agreed to ourselves," said Ronald LaMascus, president of the Arizona Credit Union League and of Corporate Credit Union of Arizona.
