Corporates' added value

You've heard it before: "Credit unions are member-owned and member-driven." It's the mantra our system hums to reinforce our uniqueness in a world filled with alternatives. It's the pivotal difference that distinguishes credit unions from all other financial service providers. Proving the tangible value behind the words, however, is tough business. Tough for natural person credit unions and tough for corporate credit unions (corporates). Corporates, like their natural person credit union members, are not-for-profit financial cooperatives. They were founded expressly to provide low-cost financial services and competitive investment and lending rates to their members. But, what is the added value that corporates bring to the "member-driven" proposition? Consider this. Last year, corporates processed over one billion items on behalf of their member credit unions. They transferred over $600 billion in funds through electronic payments services such as wires and ACH. They facilitated over $17.1 billion in cash for their members and they offered over $13.7 billion in approved credit lines to members. Corporates' strength is their ability to leverage economies of scale in the areas of item processing, payments settlement and investments for their members' benefit. They serve as an integral link in the chain of financial transactions initiated at the credit union member/consumer level. Corporate credit unions emerged more than 20 years ago from the same cooperative spirit that gave rise to the American credit union movement in the 1930s. As the credit union movement grew, the urgency for central credit unions-or "credit unions for credit unions" -became apparent. Corporate credit unions were born of that need. Corporates became a source of low cost liquidity for credit unions, usually saving them significant sums of money when they needed to borrow. Also, with deregulation of the financial services industry in the early 1980s, corporate credit unions eliminated credit union reliance on banks and other vendors through products and services designed to meet the needs and safety standards of credit unions. Diligently providing financial services that keep pace with emerging technology, flexible service capabilities and marketplace income opportunities is part of the concrete value corporates bring to their member/owners. Offering everything from investment to payment services, corporates continue to provide their member credit unions with the high-quality, innovative solutions credit unions demand. Through more diversified business activities and sophisticated product and service capabilities, the corporate network is well positioned to continue leveraging synergies that credit unions can measure and from which they benefit. We live in a "What have you done for me lately?" world. Resting on past accomplishments assures extinction in the ever-changing business ecosystem. So, what have corporates done for credit unions lately to demonstrate the value of their member-driven philosophy? * Liquidity needs: Corporates played a key role in achieving a regulatory and legislative backstop for emergency Y2K liquidity for the credit union system. In May 1999, President Clinton signed into law an emergency appropriations bill which contains a provision that lifts the Central Liquidity Facility's (CLF's) borrowing cap from $600 million to more than $20 billion. Additionally, NCUA, the Federal Reserve System and U.S. Central Credit Union created a special arrangement for providing liquidity during Y2K that uses existing delivery systems including corporate credit unions and the CLF. Corporates' efforts helped bring about extra assurance for emergency Y2K liquidity for the credit union system. Corporates are working this year to assure that the CLF's borrowing cap stays at the full $21 billion statutory level. * Investment needs: Credit unions look to corporates as the benchmark against which to measure the other innumerable sources of investment products and services. Each corporate is in the business of managing a liquid portfolio so it can respond to members' daily liquidity and investment needs. Corporates offer high quality investments at competitive rates that are similar to other market opportunities. Moreover, corporates provide credit unions a great amount of flexibility in investment structures and maturities. Another benefit to credit unions is that corporate investments do not have to be marked to market or classified as "Held to Maturity" or "Available for Sale" under Financial Accounting Standard (FAS) 115. Corporates also continue to serve as trusted resources for guidance and information on investments and asset liability management. * Settlement services: One of the true strengths of corporates is their ability to provide well-priced settlement services to meet all credit union payments system needs. Corporates are active participants in their local and regional automated clearinghouse associations and work to assure that payments system rules don't disadvantage credit unions. Moreover, corporates serve as a conduit to the Federal Reserve thereby eliminating the need for credit unions to establish separate Federal Reserve settlement accounts. Many corporates provide item processing, ACH, cash/coin delivery, lines of credit and wire services to their members. These services empower credit unions to provide innovative payment solutions to consumers. * Reinvesting in our movement: Corporates are partners with the National Credit Union Foundation, Inc. (Foundation) in the Community Investment Fund (CIF). The CIF provides much-needed funds for national and state level development initiatives and a stable source of funding for Foundation grantmaking and endowment growth. Working through state leagues and foundations, distributions from the CIF will be used for credit union development such as: projects and programs that support new, small or community development credit unions; education of credit union employees and volunteers; public education initiatives related to credit unions; and programs that extend credit union services to the unserved or underserved. Corporates are bringing their expertise and member-driven philosophy to bear on this cooperative program that benefits national and state level credit union development initiatives. To date, the CIF has received over $20 million in investments from credit unions and corporates. * Seeking additional authority to meet credit unions' needs: The NCUA regulation (Part 704) that addresses corporate credit union operations is in the midst of being revised. Corporates have provided extensive comment to NCUA on areas of the regulation that require amendment or clarification in order for corporates to bolster the value they bring to members. Specifically, corporates are pursuing the authority to engage in loan participations with their members in addition to broadened investment authorities within the parameters of safety and soundness. Profit is not the driving force for any of the services and products outlined above. Rather, corporates are driven by their members to take advantage of economies of scale. Each and every day corporates provide the services, processing and products credit unions require to meet their own members' financial service needs. That is the very tangible value corporates add to the credit union system.