Corporate Credit Unions:

Condition, Issues, and Concerns

T-GGD-95-15: Published: Oct 6, 1994. Publicly Released: Oct 6, 1994.

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Pursuant to a congressional request, GAO discussed issues concerning the financial condition and investment practices of corporate credit unions and the U.S. Central Credit Union. GAO noted that: (1) many small insured credit unions have placed a substantial part of their unloaned deposits in corporate credit unions for investment purposes; (2) the operation and investments of corporates must be fiscally sound so that small credit unions' and the National Credit Union Administration (NCUA) Share Insurance Fund's assets are safeguarded against losses; (3) as of June 1994, the U.S. Central Credit Union's assets totalled $19.8 billion; (4) the stability of U.S. Central is crucial to the fiscal soundness of the insurance fund; (5) the rapid growth of corporate credit unions and U.S. Central levelled off in 1993 due to an increase in loan demands by member credit union customers and direct market investments; (6) although the extension of federal insurance to seven corporates and U.S. Central has improved NCUA enforcement authority, five other corporates are not federally insured or subject to NCUA enforcement; (7) although NCUA has implemented a risk-based capital system for corporates which links their capital requirements to the risks that they take, there is no risk-based capital system for natural person credit unions; and (8) if corporates are allowed to expand and compete with each other nationally, NCUA may need to develop additional policies and increase staff to ensure risks to the insurance fund are minimized.

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