Newsroom

August 20, 2011

Risk weights on Treasuries clarified

NCUA recently revised its Letter to Credit Unions 11-CU-11 explaining the impact on credit unions of Standard & Poor's downgrade of U.S. long-term debt, and one of those revisions notes that zero risk weights on Treasuries only apply for those held by corporates.

NCUA rules assign a risk weight of zero for corporate credit unions' investments in Treasuries and other securities issued or guaranteed by the U.S. government. The previous version of Letter 11-CU-11, however, suggested this applied also to such investments held by natural person credit unions. The fact is that such investments by natural person credit unions still receive risk weights above zero as provided in NCUA rules.

That is the only correction to the guidance in Letter-CU-11. With the recent revision, however, NCUA adds that two of the three top Wall Street rating agencies – Fitch and Moody's – have reaffirmed their highest ratings for all debt backed by the U.S. government.

NCUA pointed out the correction last week. Apparently the revision to the letter had been posted but not announced at that time.