Debunking the U.S. Central Liquidity Rumor Mill
Rumors swirled Monday that U.S. Central Bridge had tumbled deep into a “liquidity crisis,” as one Credit Union Times source put it - but the facts are otherwise.
As it turns out, U.S. Central has in fact been cutting the lines of credit it extends to corporate credit union members.
Those cuts - sometimes sharp - are what spawned the liquidity rumors. And the cuts are very real. “Over the past year we have cut a number of lines of credit,” admitted Austin Braithwait, senior vice president, correspondent services at US Central.
There is a mathematical reason for this, however. Lines of credit, explained Braithwait, are directly supported by amounts members have on deposit in certificates at U.S. Central. Reduce that deposit and the line of credit will accordingly be reduced. U.S. Central, he added, does not extend unsecured lines of credit to members.
“Today, as in the past, U.S. Central has permitted corporates to access liquidity by borrowing against the certificates they have on deposit,” elaborated Francois G. Henriquez II, president/CEO of U.S. Central in a written response to emailed questions. “When a member’s certificate balance changes, the member’s advised line at U.S. Central Bridge could increase or decrease accordingly.”
Line of credit issues have been exacerbated in recent months as some corporates - perhaps funding Perpetual Capital Contribution campaigns at other institutions - have been withdrawing funds from U.S. Central.
But, said Braithwait, these line of credit reductions in no way suggest a “liquidity crisis.”
For its part, the NCUA – through spokesperson David Small – corroborated U.S. Central’s take on the situation. Emailed Small, “NCUA has not instigated any changes in U.S. Central’s loan policies. Credit lines are based on individual members.”
Presently, too, stressed Henriquez “all 24 of U.S. Central Bridge’s current corporate credit union members maintain advised lines of credit from U.S. Central Bridge.”