A temporary Federal Reserve program is quietly providing a cushion to corporate credit unions as they attempt to raise capital from members to meet NCUA regulatory requirements.
The excess balance account program allows corporates to offload overnight balances onto the Fed's balance sheet while still earning the same interest rate as overnight accounts. The Fed launched the program in July 2009 because it found some institutions preferred to hold excess balances at the Fed rather than selling them in the federal funds market. However, the large balances inflated correspondents' assets during a time when they were struggling to maintain capital ratios.
Mark Brown, chief financial officer at the $1.5 billion First Carolina Corporate Credit Union, said his Greensboro, N.C., institution was among the first corporates to get approved by the Fed to participate in EBA.
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