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Corp CU investment tech changes voted by NCUA
ALEXANDRIA, Va. (3/18/11)--Definitions of the National Credit Union Share Insurance Fund’s (NCUSIF) “equity ratio” and credit union “net worth,” as found in the Federal Credit Union Act, would be revised by National Credit Union Administration (NCUA) actions proposed on Thursday. The equity ratio changes aim to clarify that the NCUSIF’s equity ratio must be based solely on the financial statements of the NCUSIF alone without consolidation with other statements, such as those of conserved credit unions. Under the net worth changes, credit unions will be permitted to count special section 208 assistance provided by the NCUSIF as part of their net worth ratio. The new net worth standards will apply to loans and accounts with remaining maturities of more than five years. These loans and accounts must be subordinate to all other claims, including those of shareholders, creditors, and the NCUSIF. They must not be pledged as a security on a loan to, or other obligation of, any party, and may not be insured by the NCUSIF. The agency also approved the final version of a rule that assigns a zero risk-weighting to the NCUA Guaranteed Notes (NGNs) for risk-based net worth requirements under PCA for complex credit unions purchasing the notes. The Credit Union National Association supported the NCUA’s implementation, and has noted that credit unions that invest in these notes will have no increased risk-based prompt corrective action requirements since they will be entered as a zero in the risk-based net worth equation. Corporate credit unions will also be able to invest in NGNs after the board approved a final rule that corrects the definition of “collateralized debt obligation.” This final rule also corrects the existing list of investments exempt from the single obligor limits and credit rating requirements.


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