What is a Corporate Credit Union and How Does it Work?

A corporate credit union is a type of financial institution that provides financial services to credit unions. It's a unique entity that plays a crucial role in the credit union system.

Corporate credit unions are owned and controlled by credit unions, which means they are not-for-profit organizations. They were established to provide financial services to credit unions, such as cash management and investment services.

Corporate credit unions operate on a cooperative model, where member credit unions pool their resources to achieve common goals. They are designed to be efficient and cost-effective, passing the savings on to their member credit unions.

A corporate credit union is a credit union for credit unions. In other words, it's a financial institution that serves other credit unions, just like a regular credit union serves its members.

Corporate credit unions have members like your credit union, and they can use these corporates to manage their liquidity by depositing excess funds and borrowing money when needed.

A simple definition of a corporate credit union is that they do way more than just provide liquidity, but we'll get into that later.

A credit union is essentially a not-for-profit financial cooperative owned and controlled by its members. It's a group of people who share a common bond, such as working for the same employer, living in the same neighborhood, or belonging to the same organization.

Credit unions are formed to provide financial services to their members at a lower cost than traditional banks. They're designed to be member-centric, meaning they prioritize the needs of their members over making a profit.

A credit union's purpose is to serve its members, not to maximize profits. This is one of the key differences between credit unions and banks.

Over time, credit unions have evolved to meet the changing needs of their members. They've added new products and services to stay competitive with banks.

A corporate credit union is essentially a credit union for credit unions. It's a unique concept where credit unions can manage their liquidity by depositing excess funds and borrowing from the corporate when needed.

Corporate credit unions serve other credit unions, not individual members like your neighbor. This is a key difference from traditional credit unions.

To be more precise, corporate credit unions have members that are other credit unions. This allows them to provide services and benefits to their member credit unions.

The first corporate credit union, U.S. Central Credit Union, was formed in 1974. This marked the beginning of the national corporate credit union system.

At a corporate credit union, you'll find a unique blend of tradition and innovation. We've been serving the credit union industry since 1947, initially as State Central Credit Union, a dual-purpose credit union that supported both credit unions and individual members.

Our commitment to stewardship remains strong, guiding every decision we make. We prioritize member advocacy over rate-driven relationships, ensuring that our focus is on serving our members' needs.

A strong capital position and a broad array of flexible service offerings set us apart. We've built a reputation for delivering superior value to our members.

Here are some key ways we stand out:

We've also made a conscious effort to expand our reach, starting in Wisconsin and eventually growing into the Midwest. In 2002, we rebranded as Corporate Central Credit Union, a forward-thinking organization serving credit unions nationwide.

A corporate credit union has the power to direct the CUSO's management or policies. This means they have a significant level of control over the operations of the CUSO.

The corporate credit union's board of directors must approve comprehensive written strategic plans and policies, review them annually, and provide them upon request to the auditors, supervisory committee, and NCUA. This ensures that the corporate credit union is held accountable for its actions.

The board of directors must also ensure that senior managers have an in-depth, working knowledge of their direct areas of responsibility and are capable of identifying, hiring, and retaining qualified staff. This is crucial for the effective management of the corporate credit union.

A corporate credit union has the power to direct the management or policies of a CUSO, which means they have a significant amount of authority over these entities.

This power is a key aspect of corporate credit union governance, and it's essential for them to use it wisely.

The NCUA has the authority to direct a corporate credit union to add back some of its intangible assets on its own initiative or with the approval of the applicable state regulator or the corporate credit union itself.

This is done to ensure that the corporate credit union's financial statements accurately reflect its true financial position.

A corporate credit union's policies and practices must be commensurate with its scope and complexity, which means they need to be tailored to its specific needs and circumstances.

This is important for ensuring that the corporate credit union is operating effectively and efficiently.

The board of directors of a corporate credit union must ensure that senior managers have an in-depth knowledge of their direct areas of responsibility and are capable of identifying, hiring, and retaining qualified staff.

This is crucial for maintaining the corporate credit union's operations and ensuring that it is well-managed.

The board of directors must also ensure that accurate balance sheets, income statements, and internal risk assessments are produced timely, which helps to identify and mitigate potential risks.

This is an ongoing process that requires regular monitoring and review.

The board of directors must also ensure that financial performance is evaluated to ensure that the objectives of the corporate credit union and the responsibilities of management are met.

This involves regularly reviewing the corporate credit union's financial statements and performance metrics.

The board of directors must also ensure that planning addresses the retention of external consultants, as appropriate, to review the adequacy of technical, human, and financial resources dedicated to support major risk areas.

This helps to ensure that the corporate credit union has the necessary resources and expertise to manage its risks effectively.

Representation plays a crucial role in authority and governance. In a democratic system, representatives are elected to make decisions on behalf of their constituents, but research suggests that only about 10% of citizens actively participate in the electoral process.

In the United States, for example, the Electoral College system gives disproportionate weight to the votes of citizens in certain states, allowing a candidate to win the presidency without receiving the most popular votes nationwide.

Representatives are expected to be accountable to their constituents, but in practice, many are influenced by special interest groups and lobbyists who have significant financial resources.

Studies have shown that citizens who are more engaged in their communities and have higher levels of civic knowledge are more likely to hold their representatives accountable.

In some countries, such as Iceland, citizens have direct participation in governance through online platforms and town hall meetings, allowing for more direct representation and decision-making.

The scope of a corporate credit union is defined by its membership and purpose. It's a financial cooperative that serves a specific group of people, typically employees of a company or organization.

A corporate credit union is exempt from federal income tax under Section 501(c)(14) of the Internal Revenue Code, which means it doesn't pay taxes on its earnings. This exemption is a key benefit for corporate credit unions.

The scope of a corporate credit union is limited to its member-employers and their employees, which helps to ensure that the credit union's services and benefits are focused on the needs of its members.

To manage capital effectively, a corporate credit union must develop and follow an enterprise risk management policy. This policy is crucial in identifying and mitigating potential risks that could impact the credit union's financial stability.

The board of directors of a corporate credit union is responsible for establishing an enterprise risk management committee (ERMC) to review and oversee the credit union's risk management practices. The ERMC must report to the board of directors at least quarterly.

The ERMC must also include at least one risk management expert who has experience commensurate with the size and complexity of the credit union's operations. This ensures that the credit union has the necessary expertise to identify and manage potential risks.

Corporate credit unions are required to meet specific capital requirements to ensure their stability and soundness. In the United States, these requirements are outlined in the regulations set by the National Credit Union Administration (NCUA).

Corporate credit unions must maintain a net worth ratio of at least 7% to their total assets, as mandated by the NCUA. This ratio is a key indicator of a credit union's financial health.

The NCUA also requires corporate credit unions to maintain a minimum capital level, which is typically 7% of their total assets. This ensures that they have a sufficient cushion to absorb potential losses.

Corporate credit unions that fail to meet these capital requirements may face regulatory action, including being placed in conservatorship or liquidation. This was the case with U.S. Central Credit Union and Western Corporate Federal Credit Union, which were placed in conservatorship by the NCUA in 2009.

The NCUA's capital requirements for corporate credit unions are designed to promote stability and confidence in the credit union system. By maintaining a strong capital position, corporate credit unions can better withstand economic downturns and other challenges.

A corporate credit union must develop and follow an enterprise risk management policy.

This policy is crucial in identifying and mitigating potential risks that could impact the credit union's operations and financial stability.

The board of directors of a corporate credit union must establish an enterprise risk management committee (ERMC) to review the enterprise-wide risk management practices.

The ERMC must report at least quarterly to the board of directors, ensuring that the board stays informed about the credit union's risk management efforts.

An ERMC must include at least one risk management expert who has experience commensurate with the size of the corporate credit union and the complexity of its operations.

This risk management expert can report directly to the board of directors or to the ERMC, providing an additional layer of oversight and guidance.

Liquidity management is a crucial aspect of capital and risk management for corporate credit unions. A corporate credit union must evaluate the potential liquidity needs of its membership in various economic scenarios.

In managing liquidity, a corporate credit union must regularly monitor and demonstrate accessibility to sources of internal and external liquidity. This includes keeping a sufficient amount of cash and cash equivalents on hand to support its payment system obligations.

A corporate credit union must also develop a contingency funding plan that addresses alternative funding strategies in successively deteriorating liquidity scenarios. The plan must list all sources of liquidity, by category and amount, that are available to service an immediate outflow of funds in various liquidity scenarios.

Secured borrowings are allowed for liquidity purposes, but the maturity of the borrowing may not exceed 180 days. A corporate credit union must meet specific capital requirements to borrow on a secured basis for nonliquidity purposes.

CLF borrowings and borrowed funds created by the use of member reverse repurchase agreements are excluded from certain limits.

Corporate credit unions offer lending and asset management services to their members, providing a convenient and cost-effective way to access credit.

These services are designed to meet the unique financial needs of corporate members, who often require large amounts of capital to operate their businesses.

A key benefit of corporate credit union lending is the ability to offer customized loan products and flexible repayment terms, which can help members manage their cash flow and reduce financial stress.

By leveraging the credit union's assets, members can also access a range of investment options, such as certificates of deposit and investment portfolios.

This can help members grow their wealth and achieve their long-term financial goals.

704.11 is a crucial aspect of lending and asset management. It's the minimum credit score required for a loan to be considered a prime loan.

A prime loan is one that is considered low-risk and typically has a lower interest rate. It's a great option for borrowers with good credit.

In the United States, the minimum credit score for a prime loan can vary by lender, but 704 is a common benchmark. Lenders use this score to determine the level of risk associated with lending to a borrower.

Borrowers with a credit score of 704 or higher may qualify for more favorable loan terms, such as lower interest rates and higher loan amounts. This can save them money over the life of the loan.

Lenders also use credit scores to determine the interest rate for a loan. A higher credit score can result in a lower interest rate, which can save the borrower money.

Asset and Liability Management (ALM) is crucial for corporate credit unions to ensure they're making informed decisions about their investments. To achieve this, they must evaluate each investment's characteristics and risks, as required by the ONES Director.

The process of obtaining and adequately evaluating an investment's market pricing, cash flows, and risk is also vital. This involves considering the investment's fit into the credit union's overall asset and liability management strategy.

A corporate credit union must provide a written action plan to the ONES Director if an investment fails to meet a requirement. This plan must address the investment's characteristics and risks, as well as how it fits into the credit union's asset and liability management strategy.

The impact of holding or selling the investment on the credit union's earnings, liquidity, and capital in different interest rate environments must also be considered. This requires a thorough analysis of the investment's potential effects on the credit union's financial stability.

The ONES Director may require a shorter time period for plan development than the 30 calendar days specified in the regulation. This highlights the importance of prompt action in addressing investment failures.

Federal credit unions, including corporate credit unions, are regulated by the National Credit Union Administration (NCUA). The NCUA oversees the operations and finances of these institutions to ensure they are safe and sound.

Corporate credit unions must comply with the NCUA's regulations, including the requirement to maintain a minimum net worth ratio of 7%. This ensures that they have sufficient capital to cover potential losses.

The NCUA also sets limits on the types of investments corporate credit unions can make, such as requiring a minimum percentage of investments to be in low-risk assets like U.S. Treasury securities.

Prompt Corrective Action is a crucial step in maintaining a fair and compliant workplace.

The Fair Labor Standards Act (FLSA) requires employers to take corrective action when an employee's performance or behavior is not meeting expectations.

This can include verbal or written warnings, suspension, or even termination, depending on the severity of the issue.

However, employers must follow a specific process, as outlined in the FLSA, to ensure that any corrective action taken is fair and compliant.

For example, the FLSA requires that employers provide employees with a clear explanation of the expected behavior or performance, as well as a specific plan for improvement.

Employers must also document all corrective actions taken, including the date, time, and details of the incident.

This documentation is essential in case of any future disputes or lawsuits.

The FLSA also requires that employers provide employees with a chance to respond to any allegations or issues raised during the corrective action process.

This ensures that employees are treated fairly and have an opportunity to correct any issues before disciplinary action is taken.

Auditing and reporting are crucial components of regulations and compliance. In the United States, the Sarbanes-Oxley Act requires companies to establish an internal control system to prevent and detect financial reporting errors.

The act also mandates that companies report any material weaknesses in their internal control systems to the Securities and Exchange Commission. Companies must disclose any material weaknesses in their annual reports.

Internal audits are a key part of the internal control system, and they help ensure that financial reports are accurate and reliable. Auditors review financial records and transactions to identify any potential errors or irregularities.

The PCAOB sets standards for auditors to follow when conducting internal audits. These standards require auditors to assess the risks of material misstatement and to design audit procedures to address these risks.

Companies must also report any changes to their internal control systems to the Securities and Exchange Commission. This includes any changes to their audit committee or any new material weaknesses discovered during an audit.

Fidelity Bond Coverage is a type of insurance that protects employers from financial losses due to employee dishonesty. It's a critical aspect of regulations and compliance.

A fidelity bond typically covers losses up to $500,000, as required by the Small Business Administration (SBA) for certain government contracts. This is a crucial fact for businesses that work with the government.

In some cases, a fidelity bond may also cover losses due to forgery or alteration of documents, such as checks or contracts. This can be a significant protection for businesses that handle large sums of money or sensitive information.

To be eligible for a fidelity bond, businesses must meet certain requirements, such as having a good credit history and a clean record of compliance with regulations. This is a key consideration for businesses that want to secure a bond.

The cost of a fidelity bond varies depending on the business's size, industry, and risk level, but it's often a small fraction of the potential losses it could cover. This makes it a worthwhile investment for many businesses.

Executive compensation disclosure is a requirement for corporate credit unions. They must annually prepare and maintain a disclosure of the dollar amount of compensation paid to their most highly compensated employees.

The disclosure must include compensation from any CUSO in which the corporate credit union has invested or made a loan. This means that corporate credit unions must be transparent about the compensation paid to their employees, including those from related entities.

For corporate credit unions with 41 or more full-time employees, disclosure is required for the five most highly compensated employees. For those with between 30 and 41 full-time employees, disclosure is required for the four most highly compensated employees.

For corporate credit unions with 30 or fewer full-time employees, disclosure is required for the three most highly compensated employees. Additionally, the compensation paid to the corporate credit union's chief executive officer must always be disclosed.

Any member can obtain a copy of the most current disclosure, and all disclosures for the previous three years, on request. The corporate credit union must provide the disclosure(s) within five business days of receiving the request, at no cost to the member.

In fact, corporate credit unions must distribute the most current disclosure to all their members at least once a year. This can be done in the annual report or in some other manner of the corporate's choosing.

Corporate credit unions may also provide supplementary information to put the disclosure in context. This can include salary surveys, a discussion of compensation in relation to other credit union expenses, or compensation information from similarly sized credit unions or financial institutions.

As the corporate system grew, it became clear that not all corporates were created equal. Roughly half of the 40+ corporates were linked to their leagues and U.S. Central, while the rest operated independently.

Independent corporates tended to invest more aggressively, which resulted in better yields for their member credit unions. However, this also opened up additional risks.

Collateralized mortgage obligations (CMOs) were a popular investment among these corporates. Agency CMOs, backed by major agencies like Freddie Mac and Fannie Mae, were considered fairly safe investments.

However, other CMOs created using non-agency loans were less secure and came with interest rate risk. As rates rose, the value of these holdings lost value.

CapCorp's heavy concentration in CMOs led to a CAMEL 4 rating from the NCUA and the forced sale of two of its CMOs, resulting in a $1.4 million loss.

State-chartered corporate credit unions operate under the laws of their state of charter, and this part of the regulation does not expand their powers beyond what is already provided by those laws.

A state-chartered corporate credit union that receives funds from federally insured credit unions but is not insured by the NCUSIF is considered an "institution-affiliated party" under the Federal Credit Union Act.

NCUA must notify and consult with the state supervisory authority before taking administrative action against a state-chartered corporate credit union.

Membership Fees are typically lower than those of traditional banks. This is because credit unions are not-for-profit organizations, meaning they don't prioritize generating profits over serving their members.

The fees you pay as a member of a corporate credit union are usually minimal, with some credit unions charging as little as $5 per year for membership. This low cost is one of the many benefits of joining a credit union.

Corporate credit unions often offer discounted fees for members who also bank with their affiliated credit unions. This can result in even lower fees for members who take advantage of this perk.

In addition to low membership fees, corporate credit unions may also offer reduced fees for services like ATM withdrawals and wire transfers. These savings can add up over time, especially for businesses that rely heavily on financial transactions.

Corporate credit unions have a long history dating back to the early 1900s, with the first one established in 1909.

Their impact on the financial industry has been significant, with many credit unions providing essential financial services to their members.

In the United States, the National Credit Union Administration (NCUA) was established in 1934 to regulate and insure credit unions, giving members confidence in their financial institutions.

The NCUA's chartering process ensures that credit unions are safe and sound, with strict guidelines for financial management and risk assessment.

By 2019, there were over 5,600 credit unions in the United States, serving more than 115 million members.

Corporate credit unions like Alliant Credit Union and Navy Federal Credit Union have expanded their services to include online banking, mobile banking, and investment products, making financial services more accessible to their members.

The growth of corporate credit unions has also led to increased competition in the financial industry, driving innovation and better services for consumers.

Corporate Central Credit Union has a rich history, dating back to 1947 when it was initially known as State Central Credit Union. This "dual-purpose" credit union supported both credit unions and individual members.

The organization has undergone significant changes over the years, including a reorganization in 1980 prompted by the Monetary Control Act. This led to the creation of two separate entities: State Central Credit Union and Wisconsin Corporate Central Credit Union, which began serving credit unions exclusively on April 1, 1981.

Today, Corporate Central Credit Union is a forward-thinking organization that serves credit unions nationwide. They've expanded their reach from Wisconsin to the Midwest and beyond.

At the heart of Corporate Central Credit Union's mission is a commitment to nurturing financial wellness among their members. This is reflected in their mission statement, which emphasizes outstanding service, financial strength, trust, security, innovation, and the effective use of technology.

Here are the key values that guide Corporate Central Credit Union's decision-making: