Credit Unions Show Interesting Changes

Posted By on December 19, 2010

Some interesting changes were made on December 16’th concerning Credit Unions!  Stay Tuned!

As of the end of  November, 372 federally insured credit unions with assets of $43.4 billion were designated as CAMEL code 4 or 5. In addition, there were 1,792 CAMEL 3 credit unions with assets of $158.2. Overall, 22.3 percent of all credit union assets are in CAMEL code 3, 4 or 5 credit unions.

What does CAMEL 4-5 mean? Answer:

  [1]

What does CAMEL 3 mean?

Minutes of a board meeting by the National Credit Union Administration show a meeting took place on December 16th. The exact same day that Congress was voting to approve S.4036. The language:

New sub-part C of Part 708a establishes procedural and substantive requirements for converting a credit union to a bank through merger.

They change the rules so that the commercial banks can play in this space?  This change to the charter is also interesting:

The new requirements apply to direct mergers as well as transactions where the credit union first converts to a mutual savings bank (MSB) and then merges with another bank without operating as a stand-alone MSB.

This suggests that a Credit Union can become a Mutual Savings Bank in the morning, and in the afternoon it can merge or sell itself to a commercial bank. What do they need to get all of this done? SECRECY, of course. From the NCUA 12/16 minutes:

Finally, the proposed amendments to Parts 708a and 708b revise existing rules to enhance the secrecy and integrity of the voting process in MSB and insurance conversions.

Given that this can now be accomplished with the desired level of secrecy we would anticipate that the process will commence sometime in 2011. Some of the big banks will step in and buy up the shells of a number of the corporate Credit Unions.

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