Oct. 30, 2012 – NCUA late Monday announced the closure of U.S. Central Bridge Corporate FCU and urged credit unions anew to address their emergency liquidity needs now that most no longer have access to the Central Liquidity Facility.
“Closing U.S. Central Bridge is the last step in the effort to stabilize and reform a corporate credit union system that was close to collapsing three years ago,” NCUA Board Chairman Debbie Matz said. “We now have a stronger, safer system. We have set high standards for corporate credit union investments, capital and governance, and we’ve created a new operating environment for wholesale corporate credit unions to serve retail credit unions. The decisions NCUA and credit unions made have produced a solid foundation for the future.”
Most retail credit unions had access to emergency liquidity from the Central Liquidity Facility by belonging to a corporate credit union that was part of the CLF agent group headed by U.S. Central Bridge. U.S. Central Bridge held stock in NCUA’s CLF on behalf of all natural person credit unions that are members of a corporate but not a direct member of the CLF. As part of the closure, U.S. Central Bridge redeemed its CLF stock and the agent group is now no longer providing CLF coverage for member natural person credit unions. As a result, credit unions and their corporates no longer have the CLF as a source of backup liquidity unless they join the CLF directly.
NCUA has issued a proposed rule on emergency liquidity requirements for credit unions. NAFCU, in an official comment, opposed addressing this issue by regulation, but if the agency goes forward with one, the association is urging that the list of acceptable emergency liquidity sources be expanded.
U.S. Central was founded in 1974 and was once the largest corporate credit union. It is one of five large corporates that were brought down by losses incurred through the purchase of residential mortgage-backed securities in the years preceding the financial crisis, and which later soured. Chartered in October 2010, U.S. Central Bridge assumed operations of the U.S. Central FCU to maintain continuity of services to corporate credit union members, prevent disruption to the credit union system and protect consumers.