The Big Question: Liquidity

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RANCHO CUCAMONGA, Calif.-For Stan Hollen, a key issue needing an answer as the corporate credit union market evolves is liquidity.

"Hopefully the NCUA will go further, because right now it appears credit unions will have to go Federal Home Loan Banks and commercial banks in the future," said Hollen, CEO of CO-OP Financial Services. "Credit union liquidity could become an issue unless there is some sort of solution. I believe the remaining corporates are going to have to be given access to a credit facility."

Some new CUSOs could be formed to handle payments processing, but Hollen said the remaining corporates, along with the bridge corporates, should have the ability to accommodate most of the payments functions natural person credit unions currently need to have serviced.

"They may seek some partners, including some CUSOs," he said. "There is never a lack of interest from private companies when they see an opportunity to make a profit, but I think the solution will evolve through the corporates. The conserved corporates could emerge from the bridge into a new charter or they could merge with another corporate."

A secondary issue, he added, is the investment services corporates provide, especially to small and mid-size CUs.

"We might go back to a situation we had 20-25 years ago where natural-person credit unions were chasing yield and broker-dealers were happy to sell those investments. Some who have been around the industry a long time will remember that."

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Corporate credit unions