NCUA Sets Direction for Consolidation of Corporate Credit Unions
In a statement signed by NCUA Chairman Debbie Matz, the federal regulator sets out clear guidelines for the future of bridge corporates in particular but also impacting other corporates.
Matz opens the statement, set to post on the agency's website Monday morning, with a broad endorsement of corporates: The NCUA "continues to believe that a member-driven approach will provide the best solution for meeting member payments and liquidity needs."
The statement continues, "Corporate credit union members should work with their respective corporates and chart a strategic direction to ensure continuity of service to the credit union industry."
Then it shifts into a new gear. "The bridge corporates are temporary entities formed only to allow time for members to develop an alternative solution for services provided by their corporate," Matz' statement read. In other words bridge corporates, NCUA is saying, are not permanent fixtures; they are stop gaps to let member credit unions find other solutions.
The NCUA follows that with a loud warning. "The NCUA Board is aware that some bridge corporate members are promoting a new charter consisting of consolidated bridge corporate assets, facilities, and personnel as the preferred direction to transition out of conservatorship. Such consolidation would only be considered after the bridge corporates transition to independently operating corporate."
The statement ends on a theme the NCUA has sounded before: the agency wants to avoid mergers that produce entities that are "too big to fail." To quote from the NCUA statement, "consolidation of two or more bridge corporates could form a single corporate that could significantly increase systemic risk concerns for the National Credit Union Share Insurance Fund."
"Any consolidation of corporates must address the potential for increasing systemic risk," added the NCUA. The statement concludes, "Any consolidation plan submitted [to NCUA] will require sufficient time to review and execute in a safe and sound manner."