By Ray Birch
WASHINGTON–The effects from coronavirus (COVID-19) are increasingly being felt by credit unions, which are responding with everything from virtual annual meetings, laptops for “essential” staff, boards meeting via telephone, new attention to the bond market and concerns over potential deflation, and more aggressive cleaning procedures.
The change in procedures and focus are coming as credit unions and credit union organizations, along with other companies, are also announcing changes to
physical meetings and other events in response to the risk from coronavirus.
In Washington, the $529-million Department of Commerce FCU is among those taking steps to ensure the safety of staff and members, including one big concern, health risks to its board of directors.
“Many of my board members are over the age of 70, a very vulnerable group for COVID-19,” said CEO Evan Clark. “I sent out an email to my board this week asking about telephone meetings until there is more clarity on COVID-19. Beginning with our meeting this month, all of our board meetings will be by phone.”
Clark noted some of his board members already suffer from health issues, placing them at greater risk for serious harm from coronavirus. Health experts have cautioned that deaths from coronavirus are more likely if an individual is elderly and has health issues.
“We may be doing a virtual annual meeting, as well,” said Clark.
Rethinking Sick Leave
Turning to staff, Clark discussed how the CU will take steps to ensure their safety.
“First, what do you do about employees who have very little sick leave and they come in sick? We’ve decided to send them home and have them call the healthcare number that asks you questions to determine if you could possibly be a candidate for COVID-19 infection,” expalined Clark. “Second, we’ve identified our employees who are essential, and we are deploying laptop computers to them so they can telecommute.”
Meanwhile, Department of Commerce CU is reviewing how its own bottom line is being affected by coronavirus, and that includes what’s happening with the bond market.
“The 10-year Treasury now sits at a yield of 0.67%,” said Clark on Tuesday. “To give you some historic perspective, from 1976 to present the average 10-year Treasury rate was 6.21%. Over the past 10 years, a time of some pretty horrible financial crisis and no inflation, the average rate was 2.48%.”
As CUToday.info reported, the entire U.S. yield curve fell below 1% for the first time in history as rising expectations the Federal Reserve will cut policy rates to zero in the coming months. That has driven investors to reach for longer-dated securities. Those moves Wednesday fueled a rally in U.S. Treasuries, with the rate on 30-year bonds diving as much as 59 basis points.
Concerns Over Deflation
Evan Clark
“My big concern on a macro-economic level is deflation,” said Clark. “If consumers are very cautious, as they are becoming because of COVID-19, deflation becomes a real possibility. Then there can be a spiral of declining prices as competitors try to vie for business until finally prices are below the cost of production. Things can get really ugly when that happens. Earnings at companies can be impacted and invariably the price of stocks can potentially be affected as well.”
Clark shared how his family is eliminating air travel due to the virus.
“This coming weekend my siblings and my mom and I are going to have a conference call about how to get my mom from San Marcos, Texas, to Montana,” said Clark. “The current thinking is we will drive her… So, no plane rides, no plane tickets. This is just an example of what I’m sure is playing out thousands and thousands of times as people make critical, and in some cases, life-deciding choices. And the decisions that are being made will typically result in much lower expenditures by consumers as they hunker down to survive this.”
Don’t Be Rash
What can CUs do to address business concerns?
“Credit unions should avoid doing anything rash,” said Clark. “Rash means chasing yield without understanding why you are getting the yield you are getting. If you don’t understand it, don’t invest in it. Accept the fact there are times when margins get compressed and the bottom line will suffer because of it.”
Emphasizing Digital Channels
Like many credit unoins, meanwhile, in Cincinnati Sharefax Credit Union is emphasizing the use of digital channels to its membership.
“Given the increasing concerns regarding the spread of the Coronavirus (COVID-19), Sharefax is proactively preparing in the event of a widespread scenario. We will monitor developments and consider contingency plans. Our priority is the safety of our members and employees and ensuring our ability to continue to serve our members’ needs. As a precautionary measure, you may wish to utilize our electronic services in order to avoid coming to the office,” the $397-million CU stated in an email to members, which also listed the electronic services options the CU offers, including links to each delivery option and a phone number to call with questions.
One Big Bank’s Response
Big banks are taking steps as well. In an email to customers, Citibank “encouraged” cardholders to “access your account from home 24/7 using Citi Online or the Citi Mobile App to view transactions, check balances, make payments, and more. We've made a number of enhancements that make it easier than ever to manage your account digitally.
“If you've been impacted by COVID-19 and need our support, we're here to help,” the bank continued. “We will have dedicated assistance available 24/7–please contact us at the number on the back of your card to find out about ‘always on’ assistance programs that may be available to you, such as credit line increases and collection forbearance.
“If you visit our branches, please know, our branch teams are available to serve you, as always,” concluded Citibank. “We've augmented daily cleaning procedures with the use of stronger disinfectant products on high-touch surfaces, have made hand sanitizer readily available, and are educating branch teams on best practices recommended by the CDC.”
Other Resources
- Jeff Owen of Rochdale Paragon Group has assembled a risk-assessment checklist around implications from coronavirus that can be found here.
- CUToday.info has compiled numerous other resources and links here. http://www.cutoday.info/THE-news/Tools-for-CUs-Members