ALEXANDRIA, Va. (12/27/11)--The National Credit Union Administration (NCUA) will move forward with plans to wind down various lines of payment services offered by U.S. Central Bridge Corporate FCU, the agency announced Thursday. The wind-down excludes the services of Corporate Network eCom LLC that were purchased by CO-OP Financial Services and announced Dec. 15.
NCUA said the bidding process for the other services did not result in the selection of any additional acquirers. The agency initiated an open competitive bidding process in October to solicit acquirers for lines of business including international wires, automated settlement, and its automated clearinghouse product (APEX).
"Unfortunately, the solicitation did not result in a satisfactory proposal," NCUA said in a press release. As a result, NCUA determined that the "most effective course of action is to pursue an orderly wind-down of those services" from U.S. Central Bridge.
"Since members of U.S. Central Bridge made the business decision not to pursue a new charter to maintain payment services, we anticipated this outcome," said NCUA Board Chairman Debbie Matz. "The proposals we received from other bidders did not meet NCUA's responsibility to minimize service disruptions and impose the lowest possible cost."
Each corporate credit union, if it has not already done so, now needs to begin the process of transferring to a vendor that will replace the APEX system to continue uninterrupted payment services to member credit unions, said NCUA.
NCUA noted that another critical function of U.S. Central Bridge is serving as the agent group representative to facilitate credit union access to the Central Liquidity Facility (CLF). Due to U.S. Central Bridge's ownership of $1.9 billion of CLF stock, all credit union members of corporates can access the CLF for liquidity purposes.
As the Federal Credit Union Act bases the CLF's borrowing authority on its subscribed capital stock and surplus (retained earnings), U.S. Central Bridge's stock subscription plays a large part in the CLF reaching its current borrowing authority of $50 billion.
As a temporary entity, U.S. Central Bridge cannot hold the CLF stock indefinitely. Because credit unions must have long-term access to emergency liquidity--and that CLF stock will need to either be purchased directly by credit unions or by other corporates as agents for their members--the NCUA Board took two actions in December:
- It approved a change to Part 704 permitting corporates to deduct CLF stock investments from their assets when calculating capital ratios.
- It approved an advance notice of proposed rulemaking (ANPR) that would require federally insured credit unions to have access to a backup federal liquidity service for use in times of financial emergency and distressed economic circumstances.
The ANPR provides several options for how credit unions could meet this requirement, including membership in the CLF.
"Experience has shown that in times of financial crisis, federal sources of liquidity are often the only reliable sources," said Matz. "The ANPR is a critical step to maintain the safety and soundness of the credit union industry going forward."