OVERLAND PARK, Kansas – U.S. Central is now serving a major credit union player in the Canadian credit union system. Back in June the $3.4 (Canadian) billion Credit Union Central of British Columbia joined U.S. Central, which then reciprocated and joined CUBC. Currently CUBC has about $35 (Canadian) million in term certificates invested in U.S. Central. That amount could go up next year. It’s capped at $35 million right now because of an internal CUBC investment policy. That cap policy may be expanded to $75 million in 2002, said Rowland Kelley, vice president, finance and CFO, for CUBC. U.S. Central was granted some expanded powers in NCUA’s October closed board session that will help it better serve CUBC, which acts as the central bank for British Columbia CUs as well as their trade association. CUBC plays essentially the same role that a corporate here plays for natural person CUs. There is no real U.S. Central counterpart in British Columbia. One issue that comes up when dealing with a foreign financial that wants to invest in U.S. Central is cross-currency interest rate exchange. NCUA is now allowing U.S. Central to engage in cross-currency interest rate swaps that will enable it to hedge currency risk of CUBC’s invested dollars. Though pretty minor at this point, the deal has potential far reaching effects for both organizations. Given their the close proximity to the U.S. (Vancouver, B.C. is only about 100 miles from Seattle), there are a number of potential business opportunities for the two financials. “Our world definitely is shrinking, and we are truly becoming a global community,” said Dan Kampen, president/CEO of U.S. Central Credit Union. “The reciprocal membership between the Credit Union Central of British Columbia and U.S. Central builds on the connection of a common credit union philosophy between our two countries.” said Kampen. Although the investment path is open for CUBC to invest in U.S. Central, the major future business synergy could come with cross-border payment services, such as funds transfers and settlement. “One of the first things we’re looking at is direct deposit of funds coming North. If you have someone collecting a U.S. dollar pension, and for whatever reason living in Canada, we want to be able to direct deposit the money to that individual’s account here,” said Kelley. Right now CUBC has to rely on Canadian companies or charter banks that have U.S. dollar commercial paper facilities. Dave Dickens, senior vice president of asset liability management for U.S. Central, said one of the things that attracted CUBC to U.S. Central is that it is a credit union player. In Canada, CUBC has mostly had these types of relationships with banks. “There’s a significant opportunity to grow this business,” said Dickens. Electronic bill payment is another obvious potential business opportunity. “We’re very close to the U.S. border. A lot of people recreate in the U.S. and live here (in B.C.). They have to pay taxes, bills, whatever. A reciprocal bill pay arrangement would allow easier transfer of funds for these things,” said Rowland. Rowland said he is typical of many in British Columbia, in that he owns some property in the U.S. but resides in British Columbia. Others may do some work in the U.S., and thus have U.S. payment or tax issues. “We have a lot of South bound and North bound flows of dollars. I guess we have snowbirds going South and the U.S. has snowbirds going North. There’s a flow of money that is a natural opportunity for payments and settlements,” said Rowland. “This is a situation that’s been at both of our doorsteps, but never been explored,” said Rowland. Rowland highlighted just how closely B.C. and the U.S. are tied. “We’re real upset up here about the (Seattle) Mariners losing to the (New York) Yankees,” he joked. The cross-border activity may increase because of recent events, said Rowland. “When you think about post-Sept. 11, I think people may be more inclined to restrict their activities to North America, rather than getting on a plane and going overseas.” Rowland said that CUBC’s Ontario counterpart, Ontario Central, is considering a similar arrangement with U.S. Central. “This is a positive relationship that may help facilitate cross-border payment business in the future and efficient payment systems that span the globe,” said Kampen. Looking down the line a bit, there’s even a potential for a paper check clearing relationship. Right now CUBC does that through a Canadian bank, but may eventually want to look at working with a U.S. corporate, which are the payment settlement specialists for U.S. credit unions. A deal like that is more likely to be between CUBC and a corporate, not U.S. Central. Rowland said the corporate serving Oregon and Washington would make the most sense. That would be Northwest Corporate CU. “There’s nothing on paper or in the works, but Ive met with them and we came up with a checklist of things we could to together. At some point it might make sense to do some joint item processing,” said Kathy Garner, president/CEO of Northwest Corporate CU. Garner said given the proximity, CUBC and Northwest are also talking about joint training and educational efforts. She said international payments is another potential synergy. In the same closed board session where U.S. Central was granted currency interest rate swaps, NCUA also gave U.S. Central the ability to buy and sell whole loans of natural person credit unions; enter into purchase transactions using the whole loans as repurchase assets; and enter into repurchase agreements using debt instruments as the repurchase assets. Now instead of a large bank or security dealer pledging treasuries, agencies, CMOs, asset-backed securities, or some other marketable security in a repurchase agreement with U.S. Central, they can pledge loans as collateral. “That’s a new piece of the market we haven’t been active in,” said Dickens. -email@example.com
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