Credit Unions Turning to Corporates

Credit unions are increasingly turning to corporate credit unions as a place to invest excess liquidity.

 
 

Credit unions are increasingly turning to corporate credit unions as a place to invest excess liquidity. Over the past four years, credit unions over $50 million in assets have increased their corporate investments by $16.4 billion, a 34 percent increase in four years.

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This increase is mostly in long-term investment; the daily shares to total shares ratio at corporate credit unions dropped from 70 percent in 2001 to 45 percent in March.

While some of this increase can be attributed to the marketing efforts of the corporates, the majority of this growth is the result of a wider suite of investments products. Corporates now have more complex offerings such as derivative products to help their member credit unions hedge their balance sheets and mitigate their interest rate risk.

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Credit unions are also turning to corporates for their borrowings needs. Credit unions looked to corporates this past year to help finance their large loan growth. This resulted in over 90 percent growth loan growth at the corporates from year-end 2003 to 2004.

Credit Unions Diversifying Among Corporates

With credit unions increasing both investments and loans at corporate credit unions, they are turning to more than one corporate for help. As of December 31, 2004, 8,273 credit unions reported they are members of a corporate credit union, while at the same time corporate credit unions reported 11,645 members. This data tells us that many credit unions are members of two or more corporates.

It is always a prudent decision to spread assets among different institutions to manage risk. A challenge for credit unions that are members of multiple corporates is monitoring the corporate credit union’s financial performance. Corporate Peer-to-Peer allows credit unions to easily evaluate and compare the financial performance and soundness of the 30 corporates plus US Central. To learn more click here.

 

 

 

June 20, 2005


Comments

 
 
 
  • Ouch, not so good for the Trust for Credit Unions!
    Anonymous