While the epic "Yo Mamma" wars between banks and credit unions have been well-documented (and often lamented) on this blog, I have no explanation for the recent activities of Chase Bank and Huntington Bank, as outlined in a recent article in Credit Union Times.
As many as 30 credit unions in West Virginia and Ohio have been scrambling to establish new correspondent vendors after a regional and national bank terminated their accounts over the past few weeks.
The $1.4 billion Volunteer Corporate CU and the $3.7 billion Corporate One FCU both reported the closed accounts, and in both cases said members reported the banks cited Bank Security Act and money laundering risk.
Charlie Thomas, VolCorp’s senior vice president of West Virginia operations, said the Nashville, Tenn.-based corporate first became aware of the terminated correspondent relationships in late March when a member called, asking for assistance. He said the two banks were the Columbus, Ohio-based Huntington Bank and New York-based Chase Bank.
Thomas said a letter he’d seen from Huntington to a credit union said the decision to terminate the business relationship was the result of regulatory requirements, “some of which may be new or been amended since the credit union opened its account.” The decision reflected a change in bank wide strategy, and was not a reflection on the credit union, the letter added.
The two banks aren't providing a more detailed explanation and the Fed refuses to comment to reporters on the matter, including indicating whether the banks were directed to close the accounts by their primary regulators because of BSA concerns. Speculation includes the theory that the banks are trying to reduce volatility of deposits, but other observers note that those banks are so large that the 30 banks would be but a blip on the radar screen. Also, why only banks in those two states? Is there some massive money laundering risk suddenly emerging from coal country? Are moonshiners now allied with Mexican drug cartels and laundering massive amounts of illicit cash through these credit unions?
This may be worth following. Or, it may not be. If anything interesting pops, I'll post.