Credit Union Bank Seeks Federal Coverage
WASHINGTON - U.S. Central Credit Union, which serves as a central bank for the credit union system, is seeking federal deposit insurance coverage and expects to receive it, possibly this month.
The General Accounting Office of Congress has expressed concern about the safety of billions of dollars that credit unions place in uninsured accounts at U.S. Central.
If the request is approved, the National Credit Union Share Insurance Fund will cover up to $100,000 per account.
More important, U.S. Central, which is based in Overland Park, Kan., and chartered in that state, will have to abide by the national insurance agency's rules and will be subject to enforcement actions.
Aftermath of a Collapse
The decision follows last January's collapse of a private, Rhode Island-based insurer of banks and credit unions and comes at a time when the legislatures of several states - including Kansas - have mandated federal insurance for privately insured credit unions.
"We just felt that oversight would only enhance confidence in U.S. Central," said Ralph S. Swoboda, president of Credit Union National Association, the Wisconsin-based trade group that operates U.S. Central.
The National Credit Union Administration runs the insurance fund. Mr. Swoboda noted that U.S. Central is already supervised by the NCUA as a member of its Central Liquidity Facility. He said approval of the insurance application would "formalize" the relationship.
Key Safety Issue
According to the GAO's credit union report, released this month, only $1.1 billion of $23.3 billion in credit union accounts deposited with U.S. Central is insured. "The safety and soundness of U.S. Central is of paramount importance," the GAO study said.
Alison L. Kern, project director of the study, said the decision to seek federal insurance was a positive development.
Prodding from GAO
Mr. Swoboda said U.S. Central, an investment and liquidity facility for 14,350 credit unions, has considered federal insurance for more than two years but was prodded by the GAO report and the decision by Kansas' legislature that required 66 privately insured credit unions to convert to federal insurance.
U.S. Central had $23.4 billion in assets on June 30, supported by a net worth of $117 million.