* U.S. Central has $34 billion in assets * Settles for all other wholesale credit unions * Western Corporate also seized * Action comes as three small banks closed by FDIC (Adds NCUA spokesman, moves to bolster insurance fund) By Karey Wutkowski WASHINGTON, March 20 (Reuters) - Regulators seized the top clearinghouse for U.S. credit unions, citing a critical deterioration in the finances of the provider of services to thousands of retail credit unions. The National Credit Union Administration (NCUA) took control of U.S. Central Federal Credit Union, a huge wholesale credit union with about $34 billion in assets based in Lenexa, Kansas. It also seized Western Corporate (WesCorp) Federal Credit Union of San Dimas, California, another corporate credit union with $23 billion in assets. Stress tests of corporate credit unions had uncovered an "unacceptably high concentration of risk" at these two institutions, the regulator said in a statement. The immediate costs of the takeover are coming out of a $7 billion industry-maintained insurance fund, but will mean higher premiums levied on retail credit unions. The action highlighted strains in the nonprofit banking sector that has recently been touted as a source of new lending, even as many for-profit banks limit their lending and receive billions of dollars of taxpayer-funded capital injections. U.S. regulators also seized another three small banks on Friday, bringing the total to 20 so far this year. U.S. Central and WesCorp were carrying the bulk of the soured mortgage-backed securities that have been causing woes to the corporate credit union industry, said NCUA spokesman John McKechnie. "We've been intervening in the corporate networks... for several months now and it just got to a critical stage," McKechnie said. "In the last couple of months the problems have moved from liquidity to be more capital and asset-based." In January the NCUA injected $1 billion into U.S. Central after the corporate credit union suffered dramatic declines in the value of mortgage-backed securities it had bought. Corporate credit unions are the retail credit union's credit union, providing services including lending, and check and payment clearance services. Continued...UPDATE 3-U.S. seizes top credit union clearinghouse
Saturday, 21 March 2009
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