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Access to liquidity questions answered by NCUA
WASHINGTON (8/8/12)-- Because the role of the Central Liquidity Facility (CLF) as a liquidity provider  will change when U.S. Central Bridge FCU closes, the National Credit Union Administration (NCUA) has issued a FAQ letter to credit unions.

"Some corporate credit unions may choose to become agents by subscribing to CLF stock on behalf of their natural person credit union members. NCUA is working with corporate credit unions to allow for an orderly transfer of the corresponding portion of CLF capital stock now held by U.S. Central Bridge.

"When the existing agent-group arrangement with U.S. Central Bridge terminates, those natural person credit unions without regular (direct) membership will not have CLF access for contingent liquidity unless their corporate credit union has purchased stock on their behalf,'' according to the NCUA in a Letter to Credit Union (12-CU-10).

Credit unions are permitted to use the Federal Reserve Discount Window to meet contingent liquidity needs. However, only credit unions holding liabilities subject to reserve requirements may establish borrowing privileges at the Federal Reserve.

A credit union can be a direct member of the CLF if it subscribes to the capital stock of the CLF and complete certain documentation. The required stock subscription amount equals 1/2 of one percent of the credit union's paid-in and unimpaired capital and surplus.

Last month, the board sent out for a 60-day comment period a proposed rule requiring all FICUs with assets of $10 million or more to develop contingency funding plans describing how their credit union would address liquidity shortfalls in emergency situations.

Credit unions with less than $10 million in assets would need to maintain a basic written emergency liquidity policy, but would not be required to take further action.

CUNA President/CEO Bill Cheney said CUNA has serious concerns about any new rule for credit unions, including in the area of liquidity. The CUNA CEO urged the agency to focus on the guidance the federal financial agencies have already produced on liquidity issues, rather than release new rules.

The NCUA has scheduled a webinar on the proposed rule and the status of the CLF on Aug. 14. The agency has also said it will have a webinar on the impact of U.S. Central's closing in October.
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