Members might be aware of recent action that has been taken by the federal government – the seizure of two large corporate credit unions. It is important to understand the nature and scope of this event, and the lack of impact it has on the safety of your accounts at SF Fire Credit Union or our soundness as a financial institution.
In the Media (New York – CNNMoney.com)
U.S. takes over two credit unions after tests find vulnerability. U.S. Central Federal Credit Union and WesCorp have combined assets of $57 billion.
The federal government, in its latest effort to prop up the financial system, took over two big wholesale credit unions Friday with combined assets of $57 billion.
U.S. Central Federal Credit Union in Lenexa, Kansas and Western Corporate Federal Credit Union (WesCorp) in San Dimas, California were placed under conservatorship “to stabilize the corporate credit union system and resolve the balance sheet issues,” according to the National Credit Union Administration (NCUA).
The administration is a federal agency that regulates, charters and supervises federal credit unions.
Neither of the failed institutions serve customers directly. As corporate credit unions, they service the credit union system. Credit unions count 90 million members nationwide.
Members of the two credit unions will not experience any disruption in service and be able make deposits and access funds, according to the regulator.
U.S. Central Federal Credit Union has about $34 billion in assets, with 26 retail corporate credit union members. WesCorp has $23 billion in assets and approximately 1,100 credit union members.
The board of the NCUA analyzed the health of the mortgage and asset backed securities held by all corporate credit unions starting on January 28th. The board determined that the two credit unions taken over had “an unacceptable concentration of risk”, according to the statement.
Relevance to SF Fire Credit Union and Our Members
- What are Corporate Credit Unions?
Corporate credit unions are not like regular credit unions who serve consumers like you. They are wholesale institutions that provide services to credit unions much like a regular credit union serves the consumer. Corporate credit unions do provide investment and deposit products, but their primary function is that of being a service provider in the areas of clearing checks, processing wire transfers, and the handling of electronic payments.
- Does this Impact SF Fire Credit Union?
No, it does not. While SF Fire Credit Union is one of the 1,100 credit unions who use the services of WesCorp, the action taken by the federal government will not impact us or the high level of service that our members have come to expect.
- Does this Pose a Financial Risk to SF Fire Credit Union?
No, it does not. Every dollar that SF Fire Credit Union has on deposit at WesCorp is fully insured by the federal government. The excess funds we have at WesCorp equal less than 6% of our total deposits, with 80% of deposits having been used to fund loans to your fellow credit union members.