Tuesday, May 22, 2012

Too Much of a Good Thing

Recent news stories have highlighted that some credit unions are starting to turn away deposits, as they struggle with excess liquidity.

The Vashon Beachcomber reported that Puget Sound Cooperative Credit Union (PSCCU) has put a halt to new business accounts at its Vashon branch because it is too flush with cash with little loan demand.

PSCCU's chief executive stated that the credit union is considering writing letters to members who have $500,000 or more in their accounts and asking them to lower their balances. The CEO contends that this will allow the credit union "to receive the deposits of more members.”

The credit union opened the branch a little more than a year ago and attracted almost $20 million in deposits. Over the last year, total deposits at the credit union have grown by more than 36 percent.

As a result, the net worth ratio of the credit union has fallen from 9.31 percent to 6.95 percent. But an alternative calculation to measure compliance with regulatory capital standards states that the credit union's net worth ratio is 7.83 percent. So instead of being adequately capitalized, the credit union is still well capitalized.

The Minneapolis Star Tribune reported that Star Choice Credit Union recently mailed a short letter to about 20 customers informing them that it will no longer pay interest on the amounts they have above $100,000 in their money-market accounts.

"With the recent inflow of money, we have found that we can no longer pay market or above market rates on these accounts," President Daniel Christiansen said in the letter.

According to the Credit Union National Association, 17 credit unions offering money-market accounts dropped interest rates on all or parts of the balances to zero last year.

Read the Vashon Beachcomber story.

Read the Minneapolis Star Tribune article.


  1. One would think that after 10 years of bashing credit unions, the highly educated good Doctor would know to call consumers at credit unions MEMBERS!!!

  2. a bankster dumps on credit unions?



The content is provided for educational purposes only, with the understanding that neither the authors, contributors, nor the publishers of this site are engaged in rendering legal, accounting or other expert or professional services. If legal or other expert assistance is required, the services of a competent professional should be sought.

Comments appearing in response to articles appearing on this site do not necessarily reflect the views of the ABA. ABA makes no representations regarding the truth or accuracy of commentary or opinions that may be posted in response to the articles that appear on this website.

The inclusion herein of any link to a website, either in the text of an article or in a comment, does not denote any approval, sponsorship, or endorsement by the ABA, and ABA is not responsible for the content or opinions expressed on those linked websites or related commentary. This content is not licensed to third parties sites and is not affiliated with any third party site. Any reference to the author or this content on any third party site on the Internet is not authorized by the ABA.

It is the policy of the American Bankers Association to comply fully with all antitrust laws. Certain discussions should be considered off-limits, including those that contain competitively sensitive data such as price and cost information, or statements that could be construed as reflecting an attempt or desire to control or influence a particular market or markets. Future pricing or other prospective competitive information should never be shared.