The most immediate issue facing our industry is the continued access to services provided traditionally by corporate credit unions. The picture of what our corporate system will ultimately look like is still somewhat hazy. But recognizing the critical importance of continuity, member-owner natural person credit unions are taking a very proactive stance in shaping the future. Many have already scheduled meetings (or member group meetings) with their corporate credit unions. Others, whose services are now being provided by the bridge corporates, are also actively reviewing their options. Finally, some have already taken action to merge their corporate. As a result, I expect the fog will clear rapidly.
I commend these natural person credit unions for their hands-on approach and the corporate CEOs who have uniformly expressed support for calls to action by their natural person member-owners. In this regard, one thing is certain, the ultimate determination of the services to be provided by corporate credit unions, as well as the size, scope and extent of the corporate system, must rest with their member-owner natural person credit unions. They, and they alone, must be permitted to set the course and direction of their corporate for the future.
As natural person credit unions continue their assessments of their business needs, a number of factors come to mind. First and foremost, the NCUA staff has indicated that all the remaining corporates are economically viable. At the same time, it must be noted that the new corporate rule sets a 4% capital threshold one year from now, with only six corporates meeting this requirement today. Additionally, a subsequent rule is anticipated at the NCUA board meeting in November that is expected to limit membership to one corporate. These factors, as well as questions regarding the future of those corporates that continue to hold some distressed investments, must be carefully weighed.
Natural person credit unions should also consider diversification to include exploring alternative service providers as a fallback in the unfortunate event there is a disruption in an institution's products and services. NAFCU has provided member credit unions with information on the Federal Reserve's discount window. In addition, we have encouraged the exploration of options within the Federal Home Loan Bank System. In seeking out alternatives, and conducting their due diligence, natural person credit unions may also want to consider issuing RFPs as they would for any other product or service.
So, where do we go from here? As Former NCUA Chairman Dennis Dollar stated in a recent opinion piece [CU Times subscriber premium Beyond Black Friday, Oct. 27, 2010], there are a number of questions natural person credit unions should be considering in evaluating their options. The CEOs and boards of those member-owner natural person credit unions who have traditionally relied on the corporates are in fact actively assessing their options. They not only recognize the severity of this issue, but are well on their way to determining the right solution for their members.
Fred R. Becker Jr.