Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive
150x172_CUEffect.jpg
Contacts
LISA MCCUEVICE PRESIDENT OF COMMUNICATIONS
EDITOR-IN-CHIEF
MICHELLE WILLITSManaging Editor
RON JOOSSASSISTANT EDITOR
ALEX MCVEIGHSTAFF NEWSWRITER
TOM SAKASHSTAFF NEWSWRITER

Washington Archive

Washington

Allow CU derivative investments as risk management tool CUNA to NCUA

 Permanent link
WASHINGTON (4/5/12)--State and federal credit unions should be permitted to manage their interest rate risk (IRR) through investments in derivatives, the Credit Union National Association (CUNA) said in a comment letter sent to the National Credit Union Administration (NCUA).

The NCUA is considering allowing more credit unions to hedge IRR by using limited types of derivatives, and has released an advanced notice of proposed rulemaking on this subject. The agency has suggested that credit unions that demonstrate a relevant, material IRR exposure, have demonstrated the ability to manage derivatives, and have the net worth and financial health needed to manage derivatives could be allowed to invest in interest rate swaps and interest rate caps.

The agency currently allows only a select number of federal credit unions to engage in derivatives through an investment pilot program, but could permit more credit unions to independently use derivatives to hedge IRR.

CUNA commended the NCUA for taking on the derivatives issue, and said it supports allowing well-managed credit unions to invest in derivatives through third-parties. CUNA also supports granting independent derivative investment authority for certain credit unions with adequate derivatives experience.

The list of derivatives that are approved for credit union investment should include basic interest rate swaps, such as interest rate swaps that are payfixed or receive-floating instruments. These types of derivatives, CUNA said, would offset the credit union's balance sheet since floating rates would be paid on shares and payments with fixed rates would be received from mortgages and loans. CUNA also suggested that interest rate caps could be used by credit unions to hedge IRR. "Certain other types of derivatives to hedge IRR may be appropriate for well managed credit unions as long as they comply with any counterparty requirements, as applicable, as addressed in a regulation," CUNA added.

Any derivatives regulation that is eventually developed by the NCUA should "provide a sufficient number of eligible derivatives counterparties to provide credit unions with greater access to products and more competitive pricing," CUNA said.

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

CUNANCUA interest rate risk webinar on April 17

 Permanent link
WASHINGTON (4/5/12)--Credit Union National Association (CUNA) and National Credit Union Administration (NCUA) staff, and a credit union CFO, will team up to offer an April 17 webinar on the NCUA's new interest rate risk (IRR) regulation.

The webinar will feature insight from:

  • NCUA Division of Capital Markets Director J. Owen Cole Jr.;
  • NCUA Division of Capital Markets Deputy Director Mark Vaughn;
  • NCUA Office of Examination & Insurance Senior Capital Markets Specialist Jeremy Taylor;
  • David D'Annunzio Sr., CFO of Charleston, S.C.'s Heritage Trust FCU; and
  • CUNA Senior Economist Mike Schenk.
The NCUA has amended its federal share insurance regulations to include a requirement that federally insured credit unions have both a written IRR policy and an effective interest rate risk management program. Credit unions with less than $10 million in assets are exempted from the new regulation, and a credit union between $10 and $50 million in assets is only subject to the requirements if its first mortgage loans plus investments with maturities over five years equal or exceed 100% of its net worth. The rule will become effective on Sept. 30.

During the webinar, NCUA staff will explain why the agency adopted the rule, which credit unions will be subject to the rule, what is required of those credit unions, and how the rule guidance can help affected credit unions.

Schenk will address recent IRR trends and will bring to light possible future IRR scenarios that credit unions should plan for.

D'Annunzio will discuss the rule and provide practical advice to help prepare and implement the rule from a CFO perspective.

"With the exemptions provided by NCUA to address regulatory burdens on smaller credit unions, about 3,200 credit unions will be subject to this new regulation," noted Kathy Thompson, CUNA Senior Vice President for Compliance. "But the important figure is '800.' That's the number of credit unions that NCUA feels have to build IRR programs and policies to meet agency expectations."

The hour-long webinar is scheduled to begin at 2:00 p.m. CT.

To register for the webinar, use the resource link.

Cheney makes video radio venues for business lending advocacy

 Permanent link
WASHINGTON (4/5/12)--Credit Union National Association (CUNA) President/CEO Bill Cheney emphasized the benefits to small businesses of increased credit union member business lending (MBL) on two fronts Wednesday: in a new CUNA video encouraging all credit unions to seek lawmakers' support for legislation to increase the MBL cap, and during a guest appearance on Bloomberg Radio's Taking Stock with Pimm Fox.



Inside Washington (04/04/2012)

 Permanent link
  • WASHINGTON (4/5/12)--The Federal Housing Administration (FHA) has eased underwriting guidelines for borrowers with ongoing credit disputes. Under new requirements, loans held by borrowers with disputed credit accounts or billings of less than $1,000 will be processed by FHA's TOTAL automated underwriting system (American Banker April 4). The new requirement applies to debts that are at least two years old.  The change is designed to speed up the processing of loans for some borrowers. Borrowers with credit disputes of $1,000 or more must pay them off or start a repayment plan to be considered for a FHA single-family loan, the agency said. Some lenders have said the more rigid requirements could prevent borrowers from qualifying for FHA mortgages. Borrowers have the option of explaining in writing why a collection occurred and why it has not been paid, the FHA said in a letter to lenders on Friday …
  • WASHINGTON (4/5/12)--The Financial Stability Oversight Council, an interagency group headed by Treasury Secretary Tim Geithner, approved a rule outlining how it will designate nonbank financial firms that pose a threat to the system (American Banker April 4). The rule defines a three-step process in identifying nonbank firms, including insurance companies, hedge funds and private-equity firms, as systemically important financial institutions. In the first stage, nonbank firms must have at least $50 billion in assets to be potentially considered systemically risky. A firm must also meet at least one of the following thresholds: $20 billion in total debt outstanding, a minimum leverage ratio of 15 to 1, or $30 billion in gross notional credit default swap outstanding to trigger a closer look by regulators. After the initial evaluation, each company's individual risk profile and characteristics will be considered. Firms that move on to the final stage would receive a notice from the council for additional information such as internal risk management procedures, resolvability, or potential acquisitions that could pose risk to the financial stability of the U.S. The council would then vote on the company's designation, which would require a two-thirds majority and approval from the chairman of the council …