ALEXANDRIA, Va.-NCUA told a labor union credit union it could not pledge its assets to secure excess deposit insurance for some of the unions that it serves.
A federal credit union can only pledge its assets to guarantee deposits for a government agency or other public unit, NCUA said in a legal opinion issued to Building Trades FCU in Maple Grove, Minn.
The credit union had purchased excess insurance-coverage above the $250,000 per account of the National CU Share Insurance Fund-using a standby letter of credit and a pledge os its assets for collateral. The unions were named as beneficiaries for the letters of credit from a federal home loan bank and from a corporate credit union, and the letters were secured by the credit union's assets. The credit union believes that if it fails and cannot repay the excess shares, the FHLB and the corporate would repay the shares.
But NCUA told the credit union an FCU cannot pledge its assets to guarantee member deposits, except for government depositors, under the Federal CU Act. "Labor unions do not qualify under this provisions in the FCU Act and do not meet the definition of public units or political subdivisions under our regulations."
As an alternative to the scheme, NCUA suggested that the credit union restructure the union accounts to maximize federal deposit insurance coverage.
