Friday, September 16, 2016

CUSO Gives LICUs Access to Hot Institutional Money

A credit union service organization (CUSO), CU Capital Market Soultions, is providing low-income designated credit unions (LICUs) with access to the institutional cash market by utilizing the National Credit Union Administration (NCUA) pass-through insurance regulations.

LICUs can receive non-member funding up to 20 percent of their liabilities.

For example, Jefferson Financial Credit Union (Metairie, LA) received the first non-member deposit of $5 million on August 8th through the CUSO's non-member deposit program. The CUSO packaged together 20 institutional deposits of $250,000 each.

This does raise several policy issues about hot wholesale money.

Does the exposure to hot money increase the liquidity risk at LICUs?

Hot money tends to fuel more rapid asset growth. What is the National Credit Union Administration (NCUA) doing to limit the risk posed by rapid asset growth fueled by hot money to the National Credit Union Share Insurance Fund (NCUSIF)?

Should credit unions that are more reliant on hot money pay higher insurance premiums than other credit unions? This would require that Congress needs to reform the NCUSIF.

What is NCUA doing to ensure credit unions using this CUSO's program have the appropriate asset-liability management policies with respect to hot money?

Finally, should institutional money be the recipient of a taxpayer subsidy?



1 comment:

  1. This is a big mistake.
    The next medallion crisis coming our way.
    Probably right after we bail out the medallion loans we will have to bail out this train wreck.

    ReplyDelete