Central liquidity facility
Encyclopedia
The Central Liquidity Facility (CLF) is a mixed ownership United States (U.S.) government corporation created to improve the general financial stability of credit unions by serving as a liquidity lender to credit union
s experiencing unusual or unexpected liquidity shortfalls. Member credit unions own the CLF which exists within the National Credit Union Administration
(NCUA). The President of the CLF manages the facility under the oversight of the NCUA Board.
The Central Liquidity Facility was created by the U.S. Congress in 1998 with the National Credit Union Central Liquidity Facility Act, Subchapter III of the Federal Credit Union Act
. The primary purpose of the CLF is to provide loans to credit unions to meet short or long term liquidity needs, acting as the lender of last resort
. It performs the same general functions for credit unions that the Federal Reserve System
performs for member banks.
The Central Liquidity Facility is backed by the credit of the U.S. government. The Secretary of the Treasury
is authorized to lend up to $500,000,000 to the Facility in the event the Board certifies to the Secretary that the Facility does not have sufficient funds to meet liquidity needs of credit unions.
CLF is organized into five regional branches to serve different states. To become a member, credit unions purchase stock in the Central Liquidity Facility, initially at $50 par value per share.
Credit union
A credit union is a cooperative financial institution that is owned and controlled by its members and operated for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to its members...
s experiencing unusual or unexpected liquidity shortfalls. Member credit unions own the CLF which exists within the National Credit Union Administration
National Credit Union Administration
The National Credit Union Administration is the United States independent federal agency that supervises and charters federal credit unions...
(NCUA). The President of the CLF manages the facility under the oversight of the NCUA Board.
The Central Liquidity Facility was created by the U.S. Congress in 1998 with the National Credit Union Central Liquidity Facility Act, Subchapter III of the Federal Credit Union Act
Federal Credit Union Act
The Federal Credit Union Act is an Act of Congress enacted in 1934. The purpose of the law was to make credit available and promote thrift through a national system of nonprofit, cooperative credit unions...
. The primary purpose of the CLF is to provide loans to credit unions to meet short or long term liquidity needs, acting as the lender of last resort
Lender of last resort
A lender of last resort is an institution willing to extend credit when no one else will. The term refers especially to a reserve financial institution, most often the central bank of a country, intended to avoid bankruptcy of banks or other institutions deemed systemically important or 'too big to...
. It performs the same general functions for credit unions that the Federal Reserve System
Federal Reserve System
The Federal Reserve System is the central banking system of the United States. It was created on December 23, 1913 with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907...
performs for member banks.
The Central Liquidity Facility is backed by the credit of the U.S. government. The Secretary of the Treasury
United States Secretary of the Treasury
The Secretary of the Treasury of the United States is the head of the United States Department of the Treasury, which is concerned with financial and monetary matters, and, until 2003, also with some issues of national security and defense. This position in the Federal Government of the United...
is authorized to lend up to $500,000,000 to the Facility in the event the Board certifies to the Secretary that the Facility does not have sufficient funds to meet liquidity needs of credit unions.
CLF is organized into five regional branches to serve different states. To become a member, credit unions purchase stock in the Central Liquidity Facility, initially at $50 par value per share.
See also
- Credit unions
- Corporate credit unionCorporate Credit UnionA corporate credit union, also known as a central credit union, provides services to natural person credit unions. In the credit union industry, they are sometimes referred to as "the credit union’s credit union"...
- National Credit Union AdministrationNational Credit Union AdministrationThe National Credit Union Administration is the United States independent federal agency that supervises and charters federal credit unions...
- US Central Credit Union