PLANO, Texas – Catalyst Corporate FCU has asked NCUA, which is poised to lift its ban on financial derivatives, to let it deal interest rate swaps, caps, and options to credit unions through its investment subsidiary.

The $3 billion corporate, one of four surviving national corporates, told NCUA last week it plans to apply for authority both to use financial derivatives itself and to provide derivatives services for its credit union members through its wholly owned CUSO, Catalyst Strategic Solutions LLC.

The bid comes as NCUA is preparing to allow the wide use of a limited variety of financial derivatives, only interest rate-tied securities, for the first time. Though credit unions have traded in mortgage-backed derivatives for two decades, NCUA has barred the use of financial derivatives for all but a handful of individually approved pilot programs, some of them through WesCorp FCU, the one-time $34 billion corporate that collapsed in 2009.

In a comment letter submitted to NCUA last week Catalyst called for NCUA to reject any asset size restrictions for the use of derivatives, saying that third party providers like the Plano, Texas-based corporate could provide the necessary expertise. “If a credit union can exhibit the need for derivatives and can access the expertise needed to manage transactions, there should not be an asset restriction,” wrote Kathy Garner, president of Catalyst.

“Credit unions should not need all the expertise on staff and should be allowed to hire trusted external service providers to help them implement and manage this tool,” wrote Garner. “Catalyst Corporate feels that the use of third parties with expertise and experience is very important for the usage of derivatives to help credit unions manage interest rate risk.

Catalyst, which is a conglomeration of the former Southwest Corporate FCU, Georgia Corporate FCU and Arizona’s FirstCorp CU, has emerged along with Alloya Corporate FCU, Corporate One FCU and Mid-Atlantic Corporate FCU among the four major institutions surviving the ongoing corporate credit union shakeout.

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