CREDIT UNION

Credit Unions are the newest thrift institutions in the United States. Typically, these intermediaries have a small dimension (most of them hold less than $10 million in assets), serving only their members’ deposits (called shares) and borrowing needs. These small cooperative lending institutions have a “common bond requirement” for members, that is to say, for instance, membership is granted to union members or employees of a particular firm, and there are not stockholders. Because of the members' ownership, deposits in Credit Unions are called shares and the return is corresponded in the form of dividends instead of interest. Although they can be chartered by the state or by the federal government, most Credit Unions are regulated by the National Credit Union Administration (NCUA), which is the principal regulatory agency at federal level. In particular, the NCUA is responsible for setting minimum capital requirements and for the examination of the Credit Union. The NCUA also administrates the Central Liquidity Facility (CLF), which is the lender of last resort for Credit Unions with liquidity problems. The asset structure of Credit Unions is principally represented by small consumer loans, residential mortgage loans, and securities. The NCUA prohibits certain types of investments, including most derivatives, most stripped MBS (e.g., interest-only strips and principal-only strips), mortgage servicing rights, and residual interests in asset-backed securities (ABS), and it specifies the categories of investment allowed. For instance, they include investment in corporate credit unions. Federal depository insurance for state-chartered credit unions is provided by the National Credit Union Share Insurance Fund (NCUSIF) for up to $100,000 and $250,000 for retirement accounts, as provided for commercial banks. 
Bibliography
Mishkin Frederic S. (2010), Economics of Money, Banking, and Financial Markets, Business School Edition (2nd Edition), Pearson Education Inc.
Fabozzi F., Modigliani F., Jones F. (2010), Foundation of Financial Markets and Institutions, Pearson International Edition.
Editor : Bianca GIANNINI 
© 2010 ASSONEBB