CUNA and NAFCU's Corporate Credit Union Restructure Policy Task Force recommended that corporate credit unions should restrict the products and services they offer to short term investment products and payment processing and settlement services.
The task force said it found "considerable value" in the corporate credit union's payment and settlement services and urged that they keep offering them, even as it acknowledged the same services are available though the Federal Reserve banks.
"Although there are alternatives to some of these services from the Federal Reserve, Federal Home Loan Banks, and commercial banks, the task force believes there is significant value to credit unions in having these services provided by not-for-profit organizations controlled by credit unions," the task force said.
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Since short term credit and deposit accounts are tied to payments and settlement services, the task force recommended that corporate credit unions continue to offer these. But the task force urged that corporate credit unions not be allowed to offer longer term investment products going forward.
"This is the area that has historically and recently created the greatest risk in corporate credit unions. Purely for settlement purposes, a maximum maturity of three months would be sufficient," the task force said. "However, the task force believes that on-balance sheet deposit taking and investing in instruments of up to one year could be consistent with an acceptable level of risk. Even within this short maturity limit, care should be taken that interest rate risk is appropriately managed."
In order to help meet, in a limited way, the needs of natural person credit unions for investment products, the task force urged that corporate credit unions be allowed to own investment CUSOs that would "
provide investment advisory and broker/dealer services" to natural person credit unions, but would act in a more advisory role rather than holding long term investments themselves the task force recommended.
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