Last month the final sale of notes by the National Credit Union Administration (NCUA) took place, marking the end of its programme to resolve $50 billion of corporate credit union legacy assets, and forestall a failure of the US credit union system.
Credit unions serve 90 million customers in the US and account for about 10% of FDIC-insured deposits. They are seen as essential, alongside community banks, to serving small and medium-sized enterprises as the national banks grow ever larger, cut regional headquarters to save costs and turn their backs on smaller customers.
Less than a week after the close of the sale, the NCUA announced that it was suing JPMorgan and RBS for $800 million, accusing the banks of selling loans that did not meet underwriting guidelines. The NCUA is expected to file suits for billions of dollars against a further five to 10 banks.
Wholesale problems
The problems facing the unions started with the wholesale credit unions. Credit unions tend to be very small, with median deposits of about $15 million. With limited resources, the small credit unions would put their surplus of investable funds with a wholesale credit union, also known as a corporate credit union.
