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Comprehensive corporate plan out for 90-day comment period
ALEXANDRIA, Va. (11/20/09)--The National Credit Union Administration on Thursday approved proposed new rules for corporate credit unions that would amend Part 704 of the NCUA’s rules, adjusting the current corporate capital requirements by replacing the current 4% minimum total capital ratio with a 4% minimum leverage ratio, a 4% tier one risk-based capital ratio, and an 8% total risk-based capital ratio. The corporates would need to demonstrate capital ratios of 5%, 6% and 10%, respectively, to be considered well capitalized. The proposed rules, which will be open for public comment for a 90-day period, will also prevent corporate credit unions from investing in collateralized debt obligations and net interest margin securities, and makes A- the lowest rating at which corporate credit unions with expanded investment authority may purchase nationally recognized statistical rating organization-rated investments. Corporates will also be required to keep on hand the funds needed to support its payment system obligations. Any credit union service organizations that the corporate credit union does business with must “primarily serve credit unions” and “restrict its services to those related to the normal course of business of credit unions,” the NCUA said. The NCUA proposal would prohibit troubled corporates from providing so-called “golden parachutes” to executives, and would impose other limits on corporate leadership. Corporate boards must be mainly comprised of natural person credit union employees, and board members would be required to hold the position of CEO, CFO, or COO at their member entity. Executive compensation would also need to be disclosed on a yearly basis under the proposed rules. Credit Union National Association President/CEO Dan Mica has promised that CUNA will “develop a comprehensive view” of the new proposed rules once the 253-page document has been fully reviewed, and noted that “a number of the safety and soundness provisions of the proposed rule on corporate credit unions” were “broadly consistent” with some of the recommendations provided by the CUNA/National Association of Federal Credit Unions joint task force on corporate regulation. Commenting on the new corporate rules, NCUA Chairman Debbie Matz commended the agency’s “unprecedented effort” to incorporate outside input into the rulemaking process. The new rules have the potential to “fundamentally change” the way that credit unions interact with the corporate credit union system, and encouraged both corporate and natural person credit unions to provide extensive comments during the 90-day review period. The NCUA also approved a new National Credit Union Share Insurance Fund premium and 1% deposit, and estimated that credit unions could be assessed between .05% and .15% to maintain the corporate stabilization fund in 2010.
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