Straight To The Fed
CLEVELAND — For those credit unions lacking the appetite to recapitalize the corporates, many are considering going directly to the Federal Reserve for item processing.
Should CUs move to the Fed this spring in large numbers, the Fed says it is ready to handle the load.
There has been an undercurrent of concern within the industry about the Fed's ability to handle a rush if large numbers of credit unions bolt the corporate system. Late last year, Municipal CU CEO Kam Wong, whose New York City CU is already clearing checks directly with the Fed, said there was a "bottleneck" of applications at the Fed at that time from institutions hoping to establish item processing relationships directly with the Fed.
However, Sean Rodriguez, the Federal Reserve Banks' national sales and marketing director, told Credit Union Journal there is no backlog. "We are capable of supporting many service implementations simultaneously and do not anticipate any issues in assisting credit unions that want to set up new services. We have taken a number of steps to meet the ongoing needs of credit unions, both in preparing our support areas for additional demand and in introducing new FedComplete Packages tailored to low-volume institutions."
Rodriguez said FedComplete Packages offer a simplified fee structure and greater value for using its full suite of financial services. The packages include the FedLine Advantage access solution plus a fixed number of FedACH Services, Fedwire Funds Services, and Check 21-enabled services for a set monthly fee.
Rodriguez said the noticeable increase in credit union interest began early last year, adding the Fed works with more than 3,000 CUs. "Nearly 400 have participated in special 'Getting Started' teleseminars we hosted to meet the demand, and over 200 credit unions established new connections and services with us last year," Rodriguez said.
Sources told Credit Union Journal that another reason credit unions are considering the Fed is because it has recently lowered its prices and at the same time there is concern that corporates will increase their item processing charges without the investment income to subsidize it.