Foreign Branches Are Approved For Federal Charters

The NCUA board last week gave its go-ahead to the expansion of the international credit union movement with a new rule that will allow U.S. credit unions to expand overseas.

The new rule will allow dozens of credit unions sponsored by U.S. corporations to open international branches for their employees in other countries. Several credit unions have been seeking for years to expand into Canada and Mexico to serve their corporate sponsors in those countries.

Until now defense credit unions were the only U.S. credit unions allowed to open foreign branches, and those have always been on U.S. military bases.

The new rule will allow a federally chartered credit union that opens a branch outside the U.S. to have its deposits at that branch federally insured under the NCUSIF. Those accounts will be insured by NCUSIF only if they are denominated in U.S. dollars and only if payable at a U.S. office of the credit union.

"What this enables a multinational corporation to do, which may have operations located outside the U.S., is to serve those employees the way they have been serving employees inside the U.S.," said NCUA Chairman Dennis Dollar.

He said he was satisfied the new rule will address all the safety and soundness issues and that it will also enable flexibility for the various credit unions to have their own operating plan. The new rule will require credit unions establishing branches overseas to submit and get approved a comprehensive operating plan with NCUA and by the host country's regulator, along with any applicable U.S. state regulators.

The new rule is based on the FDIC's rules allowing U.S. banks to branch overseas. NCUSIF insurance will not be required if the deposits are insured by an insurance scheme in the host country.