Cash-Strapped New Zealand Credit Union is Passing the Hat

A credit union in New Zealand has hit upon a unique method of an unusual approach to raising new capital: It is asking its counterparts to send money.seeking donations over the Internet.

Credit Union Hawke’s Bay, in the north island town of the same name, last month e-mailed a letter to credit unions around the world soliciting contributions, which it said it would use to bolster its capital base. But the unorthodox missive drew a quick — and negative — response from the World Council of Credit Unions and its New Zealand affiliate, the New Zealand Association of Credit Unions.

Officials at the Madison, Wis.-based World Council said they opposed Hawke’s Bay’s request for donations, calling the credit union’s operating approach action “inconsistent with international credit union operating principals and prudential norms.”

Despite the World Council’s thumbs-down reaction, John Sharp, the general manager at Hawke’s Bay’s general manager, said the e-mail received a good response: A lot of advice, much of it good — but no money. Mr. Sharp said that was pretty much what he expected, “but we figured, why not ask.

“People give for a lot of good causes and we felt we were a good cause,” he said.

Founded in 1965, $5.5 million-asset Hawke’s Bay serves 7,000 members, many of whom receive public assistance.

“If we were in the States, I’m sure we’d be a community development credit union,” said Mr. Sharp said.

The World Council and the New Zealand Association advised its their members not to respond to the Hawke’s Bay e-mail, though it the council did not condemn the idea of a credit union soliciting donations. Still, John Zimmerman, a spokesman for the National Association of Federal Credit Unions said any American credit unions considering following the Hawke’s Bay example should think twice.

“An American Credit credit Union union wouldn’t want to send out a letter that the regulator would pick up and squash you with,” he said. “A letter like that could telegraph that there are problems.”

And what exactly does the regulator say? A letter asking for donations “is probably something we’d have problems with,” said a spokeswoman for the National Credit Union Administration.

“I don’t think it would be a good idea. If a credit union is in trouble, there are other mechanisms for it to seek assistance.”