NCUA Creates 'Bridge' Credit Unions

These actions, announced in conjunction with NCUA's Corporate System Resolution Plan make an important next phase in the transition of corporate credit unions currently under NCUA conservatorship. Michael Fryzel, an NCUA board member, says the priority of the NCUA and the Corporate Resolution plan is to "turn the page from a challenging chapter in credit union history, to a new chapter of promise."

The new institutions will be known as U.S. Central Bridge Corporate Federal Credit Union and Western Bridge Corporate Federal Credit Union.

The creation of bridge corporates is seen by the NCUA's Chair Debbie Matz as an important interim step toward an orderly transition that will allow consumer credit unions to exercise real choice about the future of the corporate system.

NCUA says it will use a "Good Bank/Bad Bank" model to facilitate the corporate resolution process. Bridge corporate credit unions, or "good banks" are chartered by the NCUA Board to purchase and assume "good" assets and member share deposits from the conserved corporate credit unions, or "bad banks." Bridge corporate credit unions will be highly liquid and operated to ensure stability and minimize disruption of service to member credit unions.

Other highlights of the bridge plan:

• No new service offerings, except in instances where there is a need to enhance the security and functionality of existing services;
• Fields of membership will be identical to those of the conserved credit unions they replace;
• New loans will be provided primarily for settlement purposes, and existing loans will continue to be serviced;
• Bridge corporate balance sheets will consist of assets and liabilities sufficient to sustain operational activities of the bridge corporate;
• Payments and settlement activities will be the focus of the bridge corporates. Funding will not be secured to build an asset portfolio above this stated purpose;
• Bridge corporates will not accept new members;
• In the interest of continuity of service at bridge corporates, critical staff will be encouraged to transition to the bridge corporate.

This move to create bridge corporates operated under the NCUA oversight is only temporary, say NCUA regulators, as the bridge corporates can't operate indefinitely. The plan for bridge corporates includes development of a long-term plan to transfer operations to a new corporate credit union or sell the operations to another corporate credit union. This process could take up to 24 months.