Magazine article American Banker

Credit Union Panel Urging Tighter Reins on Corporates

Magazine article American Banker

Credit Union Panel Urging Tighter Reins on Corporates

Article excerpt

WASHINGTON -- Drastic changes to the credit union industry's liquidity facilities were recommended Tuesday by a panel of experts.

A committee appointed by the National Credit Union Administration studied the corporate credit union system for four months and compiled a 77-page report that was released at Tuesday's NCUA board meeting.

Among other recommendations, the panel proposed heftier capital levels for corporates, an end to interlocks between trade groups and corporates, and tighter investment regulations.

Inadequate Capital Levels

Capital levels of the corporates are, on average, inadequate, according to the report. Excluding membership shares - which are credit union deposits that corporates consider capital - the average corporate capital level stood at 1.45% as of Jan. 31, 1993, the report said. For U.S. Central the ratio was O.73%.

The committee also argued that corporates should be allowed to accept credit unions from anywhere in the country. As it stands, most corporates deal with only a single state or a group of states.

"Although the additional competition would probably result in mergers among corporates, the surviving corporates would be better capitalized and staffed and better able to serve their constituencies," the report said.

Studying Risk Growth

NCUA is studying corporates, created in the 1970s as liquidity centers for credit unions, because they have increasingly taken on more risk.

The newly created Office of Corporate Credit Unions, headed by H. Allen Carver, will review the report and make recommendations to the NCUA board in September and October.

Agency officials said they wouldn't comment on the report until it has been reviewed, and the panelists have agreed not to comment on it.

The NCUA in March appointed a five-member committee headed by HarOld Black as part of a review of corporates. …

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