Natural person credit unions no longer need corporate credit unions in their current form and organizations that perform functions currently performed by corporates should only be funded by those who use them, Navy Federal Credit Union President/CEO Cutler Dawson wrote the NCUA.
Because most large credit unions like his don't need or use corporates and because of the availability of "competitively priced" alternatives, "the industry would be better served by eliminating the corporate credit union system," he wrote.
He suggests that to give smaller credit unions access to services currently provided by the corporates, there should be two separate non-NCUA insured CUSOs, one to provide payment systems and the other for investment management.
The capitalization of these businesses should be provided by the credit unions that use them so that they "bear all risk in the event of failure."
He also suggested NCUA consider other models for liquidity management, such as creating a cooperative of larger credit unions to lend money to other credit unions and also recommended agency give natural person credit unions the right to accept non-member deposits.
Dawson, whose credit union is the world's largest with $56 billion in assets and 3.1 million members, was responding to the agency's request for comments on the structure of the structure of the corporate credit union system. The NCUA requested the comments, which are due by Monday, when it issued its program to stabilize the corporates in January.
To stabilize corporates, the NCUA injected $1 billion of capital into U.S. Central Corporate Federal Credit Union, guaranteed the deposits of all natural person credit unions in corporates and placed U.S. Central and Western Corporate Federal Credit Union into conservatorship. Those actions are resulting in credit unions having to pay a premium to replenish the NCUSIF.