Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

News Now

CU System
Corporate Fed discount window action has no impact on ops
WARRENVILLE, Ill. (12/4/09)--Members United Corporate FCU says the Federal Reserve Board's revocation in October of the corporate's access to the Fed discount window should have no impact on its operations. "Based on our current liquidity position and other sources of funds, we do not foresee this as having any impact on our ongoing operations," Ronald E. Koza, chief investment officer, told News Now. The revocation isn't new, and the Warrenville, Ill.-based corporate's members already know about it, but recent press reports have brought the situation to a broader audience. "The Fed telephoned us in early October and told us that our discount window access was being revoked due to their internal analysis of our financial position," Koza said, noting that the decision was reported to the corporate's members in its October Portfolio Update and Financial Reports, published Nov. 20. The corporate has never needed to use the discount window. "We have not borrowed from the discount window and did not anticipate a need to borrow from the window due to our strong liquidity position," Koza said. "Members United is currently above expected seasonal trends for liquidity, and has been for most of 2009," he said in a statement. "With the implementation of the Temporary Corporate Credit Union Share Guarantee Program, access to the discount window as a source of back-up liquidity is less important today for Members United than it was at the beginning of the year, when we first put the facility in place as a contingency. Collateral maintained at the Federal Reserve Bank has been released and is available for other borrowings," Koza said. Other sources of funds include secured borrowing from brokers and dealers, U.S. Central, and guaranteed borrowings from the fed funds market, Koza told News Now. "If the situation warranted, we have the option to establish a debt issuance program with a guarantee similar to that of our deposit program." So how does the corporate get back its access to the discount window? "Through later research we found out that we could request reinstatement once our financial position had changed," said the corporate in an e-mail to News Now. "Unless we request reinstatement, we do not know when or if the Fed might review this again." Koza noted that Members United "continues to participate in the Temporary Corporate Credit Union Share Guarantee program, which has insured member deposits are safe and has provided us with enhanced liquidity. We have deliberately changed our investment strategy to invest cash or cash equivalents in this volatile market, and have been doing so over 18 months." The corporate clarified that the Fed's action was not taken as a result of the corporate's October financial results. The action was taken before the corporate reported a $149.6 million loss for October and a $295.1 million loss for 2009. Members United also clarified that it began the process of developing access to the discount window based on its own review of its liquidity situation and as a backstop in the event of a severe liquidity stress. "This was prior to the deposit guarantee program instituted by the National Credit Union Administration, which provided much more stability of deposits and liquidity" with a government agency guarantee, the corporate said.


RSS





print
News Now LiveWire
Maine credit unions put Food Mobile on the road to relieving hunger in rural areas http://t.co/R0xpt6BAZE
1 hours ago
.@TheNCUA's Matz: PALS should be exempt from Military Lending Act proposal #NewsNow http://t.co/Vy9uNhOIEr
1 hours ago
#NewsNow Iowa loan growth 3 times national bank rate http://t.co/fUvudPLg5d
4 hours ago
.@ICBA tallies its Home Depot data breach costs: $90M, 7.5M cards http://t.co/iJgRDC2AKZ
5 hours ago
.@icul's Jury elected treasurer of @WOCCU exec committee http://t.co/HEF1UChN8f
6 hours ago