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The biggest difference between credit unions and other financial institutions is that the members are the owners. The benefits of ownership are returned to the member in the form of lower loan rates, higher dividends on savings and personal service. Credit unions exist solely for the purpose of meeting the financial needs of their member-owners. Credit unions are based on a one-member, one-vote structure, thus giving members the power to direct credit union policy in an effort to meet member needs.
Recently the NCUA (which stands for the National Credit Union Administration, an independent federal agency that supervises federal credit unions and insures saving in federal and most state-chartered credit unions) announced that two “corporate” credit unions (basically a “central bank” type of institution for credit unions) were taken into conservatorship. Here’s what the news means to you.
Four key facts:
- Your deposits are safe, insured to at least $250,000. Nothing that has taken place has impacted that insurance one bit.
Credit unions are also federally insured up to $250,000 by the National Credit Union Share Insurance Fund and backed by the full faith and credit of the U.S. Government, just as the FDIC does for bank deposits. No credit union member has ever lost a dime of federally insured funds.
- There are thousands of credit unions in the US, and there is a small number (28) of wholesale institutions that do not serve consumers; they provide liquidity, investment and payments services to credit unions like yours.
It was two of these “corporate” credit unions that were placed into conservatorship, which means they are still operating normally but the U.S. government managing them. You can learn more about these corporate credit unions on the NCUA website: www.ncua.gov.
- Credit unions are lending, providing a safe place for saving, and helping their members. In fact, credit unions are actively lending when other financial institutions have cut back.
Credit union industry loan growth last year, even amid a recession, increased in Florida, suggesting more consumers struggling in today's economy are looking for-and finding-affordable access to credit at their credit unions. Credit unions are continuing to lend actively this year.
- Credit unions which serve members – like yours - have not been taken into “conservatorship,” the stories you’ve seen recently are about just two wholesale credit unions.
Credit unions, where 90 million Americans save and borrow, are well capitalized and strong (nearly 11% capital-to-assets compared to a federal "well capitalized" requirement of 7%). Our capital cushion is stronger than you would find at most banks. Even the Wall Street Journal has noted that in today’s economy regular credit unions like yours that serve consumers continue to be a safe haven and offer great value. As an industry, our average capital-to-assets ratio is more than 10%. That’s considerably higher than the 7% industry standard for being “well capitalized” and higher than the banking industry’s average of about 9%. This 10% capital means credit unions are well positioned to absorb the costs of this action by the agency (which intends to charge higher deposit insurance premiums) with minimal outward impact on our members.
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