Barclays Capital secures Credit Unions seized by the NCUA

September 26th, 2010 - this article is free to republish with open public license

Three credit unions were recently seized by the NCUA, including United Corporate FCU.

Corporate credit unions have recently come under fire, with the NCUA seizing institutions which no not adhere to the rules. A recent audit has closed 3 unions with assets totalling 17 billion.

Barclays Capital is managing the proceedings involved with securing the seized companies

Reuters – The National Credit Union Administration said the three corporate credit unions, which provide clearing services to retail credit unions, were critically under capitalized.

Barclays Capital will manage the securitization plan, the regulator said. A securitization trust will be created to issue about $35 billion in guaranteed notes backed by the government, a process that will likely start in October, the NCUA said.

“This approach is best for taxpayers, consumers and credit unions,” NCUA Chairman Debbie Matz said.

Matz said the agency also put in place on Friday regulations requiring corporate credit unions to hold higher levels of capital and setting risk limits.

The institutions seized on Friday were Members United Corporate Federal Credit Union of Warrenville, Illinois; Southwest Corporate Federal Credit Union of Plano, Texas; and Constitution Corporate Federal Credit Union of Wallingford, Connecticut. Matz said combined they had about $16 billion in assets.

The seizures come after the NCUA last year took over two other such institutions: U. S. Central Corporate Federal Credit Union of Kansas and Western Corporate Federal Credit Union of California.

Corporate credit unions are the retail credit union’s credit union, providing services including lending, and check and payment clearance services.

The wholesale credit unions have experienced more troubles than their retail counterparts because they did not face the same restrictions on permitted investments, leading to big losses during the financial crisis.

The $50 billion in troubled assets comes from all five credit unions and is mostly in the form of mortgaged-backed securities.

Matz said 70 percent of all assets held by corporate credit unions are now under conservatorship.

The seizure of the five firms will ultimately cost the industry between $7 to $9 billion, she said, and NCUA will collect this amount from credit unions over the next 10 years. Taxpayers will not have to foot any of the bill, she added.

She also said credit union customers will not be affected. “This will be invisible to the consumer. ”

The NCUA insures credit union and consumer deposits up to $250,000 per account.

About Barclays Capital

Barclays Capital is a leading global British investment bank. It is the investment banking division of Barclays plc which has a balance sheet of over

Date September 26, 2010