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Liquidity rule changes too broad CUNA says
WASHINGTON (2/24/12)--The Credit Union National Association (CUNA) does not support the National Credit Union Administration's (NCUA) proposed emergency liquidity regulations for federally insured credit unions because CUNA does not agree that a new rule on liquidity is needed.

The CUNA comments were in response to a request for comments from NCUA regarding whether credit unions should be required to maintain access to emergency liquidity. The agency's notice outlines a number of options that credit unions could take to ensure they maintain needed liquidity in times of financial stress.

Under the notice, credit unions could ensure liquidity by:
  • Becoming a member of the NCUA's Central Liquidity Facility (CLF) by subscribing to CLF stock or through a corporate credit union;
  • Obtaining and maintaining "demonstrated access" to the Federal Reserve Discount Window; or
  • Maintaining a certain percentage of their assets in highly liquid U.S. Treasury securities.


CUNA worked with various association groups and collected data, as it routinely does, to respond to the notice in its comment letter. The majority of commenters indicated they do not support a new emergency liquidity regulation.

CUNA does agree that monitoring and managing liquidity by credit unions, particularly larger ones, is very important for a smooth functioning payment and financial system, but added it has reservations about requiring all federally insured credit unions to develop and maintain access to federal sources of liquidity that are approved by NCUA.

"Credit unions should decide for themselves, based on their risks, whether an emergency liquidity source is called for and what the source or sources should be," CUNA Deputy General Counsel Mary Dunn wrote.

If NCUA does move forward with an emergency liquidity proposal, the agency should consider a credit union's level of payment-system risk and net worth, among other things, when it determines which credit unions should be subject to the rule, the CUNA letter continued.

Ninety percent of credit unions that responded to a CUNA comment call on the liquidity proposal said alternative federal sources, such as the Federal Home Loan Banks (FHLBanks), should be acceptable sources of liquidity to meet the needs of the NCUA liquidity proposal, if the agency moved forward.

CUNA strongly supported the use of FHLBanks for liquidity and offered several recommendations to improve the CLF, as well as access to the Federal Reserve's Discount Window for credit unions.

The 12 Federal Home Loan Bank presidents, in their own comment letter, urged the NCUA to add their banks to the agency's list of approved emergency liquidity providers for credit unions.

"Like Treasuries, FHLBank Consolidated Obligations are accepted as safe investments and have garnered support from regulators and market participants for their benefits as a source of liquidity during times of crisis," the presidents wrote.

They also said, "Unlike certain sources of liquidity that are only available during times of emergency, FHLBank (a)dvances serve as a source of liquidity for member institutions, enhancing their funding abilities in all economic cycles," the presidents added.

For the full CUNA comment letter, use the resource link.


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