CFO Focus: Should you be serving political subdivisions?

Two funding experts suggest four steps for expanding into this new market.

by D. James Lutter and Todd A. Terrazas, CU Management

Credit unions have been at the heart of local communities for more than 100 years. Originally, they grew due to their focus on serving specific member groups or communities through a common bond. More recently, they have seen growth from serving the needs of member businesses.

An area for additional member business growth is in serving political subdivisions, such as counties, cities, towns and villages, and such special districts as school districts, water districts and park districts. Credit unions have traditionally focused on serving employees of political subdivisions, but with their increasing size and footprint coupled with advances in technology, they are able to compete for the opportunity to serve the member business needs of political subdivisions as well.

Even with increased size and systems, credit unions often face state statute hurdles when competing with banks for the business of political subdivisions. These restrictions are written into state investment statutes and policies, which banks and bank trade groups have historically played a significant role in crafting.

Some states legislate consistently for credit unions and banks (give them the same requirements), whereas other states restrict by footprint (branch presence) or type of insurance or institution (Federal Deposit Insurance Corp. vs. National Credit Union Share Insurance Fund), from which other restrictions stem (such as collateral requirements).


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