Aug. 8, 2012 – NCUA issued three letters late Monday regarding the interest-rate risk regulation set to take effect Sept. 30, the extension of the 18 percent loan-rate cap and the impact on credit unions of U.S. Central’s planned redemption of Central Liquidity Facility stock this fall.
NCUA Letter 12-CU-11 addresses the IRR rule, providing general Q&A on how the rule intersects with requirements for federal share insurance, previous letters on this issue and how examiners will respond if credit unions are not in compliance.
For example, the letter notes that the IRR rule is not intended to give examiners reasons to remove insurance; it says examiners “will not summarily remove insurance” from credit unions.
NCUA has noted the IRR rule will affect 45 percent of insured credit unions. Letter 12-CU-11 recaps the exemptions for credit unions with assets of less than $10 million and credit unions with assets of $10 million-$50 million that have a supervisory interest rate risk ratio of less than 100 percent.
Here’s a look at the other two letters:
- Letter 12-FCU-04: NCUA’s continuance of the 18 percent federal credit union loan-rate cap to March 10, 2014, is noted here. The board approved the extension last month; the cap had been scheduled to revert to the statutory limit of 15 percent this Sept. 10. NCUA can revisit this decision at any time. Meanwhile, the 18 percent cap allows federal credit unions to keep offering a payday loan alternative under NCUA’s short-term small loan program at a rate of up to 28 percent. (This cap equals the FCU loan-rate cap plus 1,000 basis points.)
- Letter 12-CU-10: This letter explains what is happening with CLF stock later this year and NCUA’s proposed rule on required emergency liquidity. NCUA notes that U.S. Central Bridge Corporate FCU is set to close by Oct. 31. When this happens, the corporate will redeem the CLF stock it holds on behalf of its member corporate credit unions and their members. At that point, these credit unions will lose access to backup liquidity from the CLF unless they join directly. (See more in the attachment.)
NCUA issued a rule on emergency liquidity requirements in July, and comments are due Sept. 28. NAFCU has opposed NCUA’s addressing credit union emergency liquidity sources through regulation. If the rule goes forward, however, it is strongly urging that the agency include membership in a Federal Home Loan Bank as a valid source. (See NAFCU’s Regulatory Alert, and submit input by Sept. 7 to the association’s official comment.)