Conditions in the market and in the industry can combine to quickly deplete a credit union’s on-balance-sheet liquidity reserve. That’s why emergency liquidity may be required. By serving in a correspondent capacity, we can help with access to the two NCUA-approved options for emergency liquidity: The Central Liquidity Facility (CLF) or the Federal Reserve Discount Window.
The Discount Window is an instrument of monetary policy controlled by the Federal Reserve that allows eligible institutions to borrow money from the Fed, usually on a short-term basis, to meet temporary shortages of liquidity caused by internal or external disruptions. Accessing the window requires pre-positioning collateral and completing the forms below:
Corporate One’s Role: Our members interested in establishing Discount Window access may use Corporate One as their correspondent bank. Simply complete the required agreement to designate Corporate One as your correspondent bank and submit along with your packet to your local Federal Reserve Bank. If you designate Corporate One as your correspondent bank, you do not have to open an account with the Fed; however, you can still access the Discount Window, providing you have sufficient collateral. All advances and payments will be posted to your Corporate One One Account, which simplifies access to the Discount Window.
The CLF was established in 1979 as a back-up, 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 the Federal Financing Bank.
Direct CLF Membership: Credit unions can establish direct membership in the CLF, and Corporate One can serve as your correspondent. This correspondent role does not require a membership in Corporate One and it allows us to assist with the CLF membership process, assist with advances, and serve as the collateral administrator on behalf of the CLF.
A credit union must subscribe to the capital stock of the CLF and complete certain documentation. The required stock subscription amount equals ½ of 1 percent of the credit union’s paid-in and unimpaired capital and surplus. One-half of this sum must be sent to the CLF, while the remaining portion is on-call by the NCUA Board. In return, the CLF pays a dividend based on its earnings and short-term interest rates.
Corporate One’s Agent Member Role: Corporate One currently serves as an Agent Member for member credit unions less than $250 million in assets and who are not already direct members of the CLF. In this role, Corporate One has fulfilled the membership stock requirements to provide access to this emergency source of liquidity. As your Agent Member, Corporate One will assist your credit union and the CLF with the following: