May 21, 2010
This is Web-only bonus coverage from “Delicate Debate” in the June 2010 issue of Credit Union Management magazine.
Corporates were formed to be credit unions’ credit unions, much as banker’s banks serve banks. How CU executives feel about corporates depends partly on how they feel about giving their business to banks instead.
$80 million Atlantic Financial Federal Credit Union, Hunt Valley, Md., has always used a correspondent bank for operating services.
That bank has gone through a series of acquisitions and name changes—from First National Bank of Maryland to AllFirst Bank to M&T Bank—but the financial services division has continued to offer good correspondent services to credit unions and smaller community banks.
While Atlantic Financial FCU has occasionally used some services of Capital Corporate and Mid-Atlantic Corporate, as well as the Federal Reserve, it has never invested in capital shares and therefore has never experienced a loss when the corporates ran into trouble, reports Richard T. Webb, president/CEO and a CUES member.
Besides the capital investment required, the difference between a correspondent bank and a corporate credit union lies largely in the name, Webb suggests. “Credit unions use corporate credit unions for the same reason they have their own leagues, chapters and service organizations,” he says. “It’s the perception of keeping the business in house, within the credit union community.”
There has been rivalry and sometimes litigation between banks and CUs, and many CUs reinforce their identity and clarify their allegiance by avoiding banks. But Webb says his bank was always supportive of CUs, including during a lawsuit that led to the Supreme Court case in the late ’90s. As a result, his management and board never saw a reason to change. Now the CU has no capital shares investment to write off, and continues to get reliable and cost-efficient services from a financial institution that operates under less of a cloud.
Richard H. Gamble is a free-lance writer based in Colorado.
