Corp Task Force IDs Guiding Principles

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ONTARIO Calif. – The Corporate Realignment Task Force recently formed here in the wake of NCUA's revised corporate plan said it has arrived at several guiding principles as it begins its work: the need for a system solution; the need for aggregation; and the need for a universal solution.

Among the points made in a statement released by the Task Force:

* System solution: “While some commercial and outside organizations may wish to provide CU item processing and/or payment system services, many CU leaders have expressed their hopes for an enduring system solution instead. Credit union leaders have not forgotten, and hope not to repeat, the disruption that occurred for dozens of credit unions when Bank of America acquired Security Pacific Bank, and Security Pacific's profitable credit union service division was dissolved because service to credit unions was not consistent with BofA's business philosophy. And while other types of business organizations may be able to provide item processing, a financial institution connection is needed to provide collaborative settlement and related liquidity services.”

* Aggregation: “It has been said that, in this instance, too many solutions may be as bad as no solution at all, since it could lead to irreversible system fragmentation. To successfully replicate the essential services natural person credit unions have been accustomed to receiving from their corporate credit unions (minus the investment and  inter-lending functions) in a cost-effective manner, will require considerable aggregation of volume, since the cost of these services will no longer be subsidized by investment activity. Given likely narrow margins, it is unlikely that a multitude of solutions will see much success; competitive pressure could result in predatory activity and eventually more painful consolidation.”

* Universal Solution: “Many credit union leaders, including those at larger credit unions, have expressed their hope that a system solution will emerge that provides quality, affordable service for all types and sizes of credit unions. Our strength, both politically and operationally, lies in cooperation and system unity; it is important to provide logical, affordable service opportunities for smaller and mid-sized credit unions as well as larger ones; for modest organizations as well as complex ones.”

 

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