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Changes to Central Liquidity Facility (CLF) with Approaching Closure of U.S. Central

Sept. 6, 2012 -- Dear Members:

As you are aware, the National Credit Union Administration (NCUA) has slated to close U.S. Central Bridge Federal Credit Union (U.S. Central), the wholesale credit union utilized by the corporate network, by the end of October. Corporate One is prepared for this move, most notably by converting away from APEX-ACH, which is presently underway. The closure of U.S. Central also brings changes relative to the Central Liquidity Facility (CLF) that are of particular importance in light of other regulatory changes surrounding credit union emergency liquidity currently being proposed by the NCUA.

The CLF was established in 1979 as a backup, emergency liquidity provider for credit unions, and is operated by the NCUA. The CLF’s lending activities are funded by its capital, subscriptions from credit unions, and by borrowing from outside sources like the Federal Financing Bank. Your credit union has had access to the CLF through your membership in Corporate One; however, with the closure of U.S. Central, their future ability to provide this service to you will cease.  With U.S. Central serving as the agent-group representative, it had purchased capital stock in the CLF on behalf of natural person credit unions that are members of corporate credit unions, thereby granting these member credit unions access to backup liquidity. This stock will be redeemed once U.S. Central closes and credit unions will no longer have access to the CLF for emergency liquidity as they do today, solely by virtue of belonging to a corporate credit union.

Understanding the role of the CLF, how it works and the impact on credit union access to the CLF due to the closure of U.S. Central is important given the NCUA’s proposed new rule to Regulations Part 741.12, entitled Maintaining Access to Emergency Liquidity, wherein credit unions will be required to have written policies or contingency plans regarding liquidity and which would require credit unions with $100 million or more in assets to maintain access to a government-backed source of emergency liquidity. This proposed rule, which is out for public comment through September 28, lists accepted sources for this emergency liquidity to include establishing borrowing access through Federal Reserve Discount Window as well as membership in the CLF via an agent or direct membership.

For those of you interested in the Federal Reserve Discount Window, you can read more via the link provided in this article, but please know we are also working with our Fed contacts to set-up an informative webinar that will outline how Corporate One members can establish emergency liquidity through the Federal Discount Window. We’ll be sure to let you know the details once we have them confirmed. So, you can expect more information from us on this sometime during the beginning of September in your Inbox and/or on our Web site.

For those of you interested in exploring direct membership in the CLF by purchasing stock, as no other direct (corporate) agents will exist once U.S. Central closes, know that Corporate One will assist you with the process any way we can.  As the current emergency liquidity funding access through the CLF is in the process of changing, we will inform you of any modifications to the process or any changes made to the role Corporate One would play in helping your credit union in accessing the CLF. 

Please be assured these changes to the CLF do not affect our members’ traditional advised lines already in existence; however, we may need to work with your credit union to determine how each line of credit gets collateralized. These lines of credit will continue to be offered to all Partner members that have invested in Perpetual Contributed Capital.  Associate members do not have the same access to lines and are subject to limitations on lines and incur a direct cost for their line.

Should you want further information on the CLF or the NCUA’s proposed rule, you might find the NCUA’s FAQs helpful to review. If you have additional questions about accessing the Federal Discount Window or your Corporate One lines of credit, please contact Denise Brown, VP/Controller, at 866/MyCorp1, ext. 9367 or at dbrown@corporateone.coop. With questions regarding the CLF, please contact Tammy Cantrell, SVP, ALM, at ext. 9312 or tcantrell@corporateone.coop. You are also welcome to contact me at ext. 9300 or e-mail me at lbutke@corporateone.coop.

Sincerely,

Lee C. Butke
President/CEO