ALEXANDRIA, Va.-NCUA last week said that following the sale of U.S. Central FCU's electronic banking services to CO-OP Financial Services it will move forward with plans for an orderly wind-down of the other U.S. Central services in 2012.
Those services, which have been run by NCUA since its March 2009 takeover of U.S. Central, include international wires, automated settlement, and its automated clearing house product (APEX). Since there were no bidders for those businesses, NCUA said it determined that the most effective course of action is to wind down those services from Kansas-based U.S. Central.
"Since members of U.S. Central Bridge made the business decision not to pursue a new charter to maintain payment services, we anticipated this outcome," said NCUA Board Chairman Debbie Matz. "The proposals we received from other bidders did not meet NCUA's responsibility to minimize service disruptions and impose the lowest possible cost."
Each corporate credit union, if it has not already done so, now needs to begin the process of transferring to a vendor that will replace U.S. Central's APEX system in order to continue uninterrupted payment services to member credit unions. Catalyst Corporate, for instance, which is in the process of merging the assets of Western Bridge Corporate FCU (Wescorp), issued a statement last week indicating it is already prepared to fill the payments void for its member CUs.
Another critical function of U.S. Central is serving as the agent group representative to facilitate credit union access to the Central Liquidity Facility. Due to U.S. Central's ownership of $1.9-billion of CLF stock, all CU members of corporates can access the CLF for liquidity purposes. As the FCU Act bases the CLF's borrowing authority on its subscribed capital stock and surplus (retained earnings), U.S. Central's stock subscription plays a large part in the CLF reaching its current borrowing authority of $50 billion.
Board Takes Two Actions
As a temporary entity, U.S. Central cannot hold the CLF stock indefinitely. Because credit unions must have long-term access to emergency liquidity-and that CLF stock will need to either be purchased directly by credit unions or by other corporates as agents for their members-the NCUA Board took two actions in December:
• It approved a change to Part 704 permitting corporates to deduct CLF stock investments from their assets when calculating capital.
• It approved an advance notice of proposed rulemaking that would require FICUs to have access to a backup federal liquidity source for use in times of financial emergency and distressed economic circumstances. The ANPR provides several options for how credit unions could meet this requirement, including membership in the CLF.
