WASHINGTON (5/29/13)--While it considers it a positive that the National Credit Union Administration is seeking comment on a proposal to allow eligible credit unions to use simple derivatives to hedge against interest rate risks, the Credit Union National Association says concerns with the proposal are surfacing.
In its May 28 issues of the CUNA Regulatory Advocacy Report, CUNA says the hottest issue surrounding the proposal right now is whether only those who want to participate in the program should bear the costs of applications and the supervision and examination costs associated with it.
"One of the concerns about the possible fees is that such a requirement could set a precedent for a new fee structure from NCUA for other new authority or services that a credit union is permitted to do if NCUA concludes the activity introduces more risk to the National Credit Union Share Insurance Fund," the CUNA publication notes.
CUNA also notes that restrictions, such as a limit on notational value at 100% of net worth for a Level I credit union and 250% for a Level II credit union, as well as interest rate and maturity caps, have also raised concerns.
CUNA's Examination and Supervision Subcommittee already has had a first meeting with the NCUA to discuss issues associated with the derivatives proposal. Comments will be due to the agency in early July.
Use the resource links to read the entire issue of the CUNA Regulatory Advocacy Report (members only), and to access more information on the NCUA derivatives plan.