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CU System
Gentile New Jersey CUs want corporate in future
HIGHTSTOWN, N.J. (2/24/09)--A recently held New Jersey Corporate Credit Union Forum made one point: New Jersey credit unions want a corporate credit union network in the future. That message “came through loud and clear” from the more than 30 credit union leaders in attendance, wrote Paul Gentile, president/CEO of the New Jersey Credit Union League (NJCUL), in the league’s newsletter (The Weekly Exchange Feb. 16). The National Credit Union Administration’s (NCUA) Advanced Notice of Proposed Rulemaking on corporate credit unions addresses potential structural changes at corporate credit unions. Some significant structural changes are being considered, Gentile said. “For example, should the payments processing functionality of corporates be stripped out and housed in a national credit union service organization to segregate the investment and payments businesses? NCUA also is looking at the number of corporate credit unions. Does the credit union movement need 28 corporates in a business that benefits from scale?,” Gentile asked. “One idea that is being floated is a regional-based corporate system,” Gentile wrote. “Under this model, there would be much fewer, larger corporates serving defined fields of membership. Some corporates are advocating that competition, while not being completely eliminated, is reduced by calling on credit unions to ‘pay to play,’ so to speak, by choosing a primary corporate, which would require the CU to keep a certain amount of capital at that corporate.” Capital is an issue to be considered with a new corporate network. The system has been undercapitalized for years, but has performed so well it has never been an issue, Gentile added. “Another key area is investment authorities,” Gentle wrote. “Some believe corporates should be limited to what they can invest in, given our current situation. However, credit unions should consider investment authorities very carefully and not just look at our current situation. “If we significantly limit authorities, it will be difficult for our corporate system to deliver a competitive investment offering that will bring value to credit unions,” he added. “Some believe the focus should be more on concentration risk. Many don’t think enough attention was paid to concentration risk, no matter what the investments were rated.”
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