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NAFCU seeks clarity on investment rule
NCUA's two board members, Michael Fryzel and Debbie Matz (chairman), approved final rules on investment analysis standards and fidelity bond and insurance. - NAFCU photo |
Dec. 7, 2012 – NAFCU is asking NCUA to clarify the final rule its board approved Thursday on investment analysis standards for federal credit unions that removes "credit ratings" as a key determinant of creditworthiness.
The final rule, promulgated under the Dodd-Frank Act, replaces the minimum credit rating required for investment securities with a statement that credit unions must conduct an internal analysis of the capacity of each issuer/issue to honor their obligations, as solely relying on meeting the minimum credit rating is insufficient.
For counterparty transactions, the final rule replaces references to credit rating agencies with an internal credit analysis standard. The analysis must be based on a standard set by each FCU's board. The board can rely on external ratings, reports, analyses, opinions, and other assessments issued by third parties, but it cannot rely solely on external ratings.
NAFCU General Counsel and Vice President of Regulatory Affairs Carrie Hunt said the agency needs to issue a clarification since FCUs will still be able to rely on credit ratings to measure risk. "The NCUA needs to clarify this with examiners so they do not incorrectly apply the final rule and penalize credit unions," she said. "NAFCU continues to be concerned with the rule."
NCUA plans to issue supervisory guidance to FCUs and corporates prior to the rule's effective date. The final rule takes effect six months after publication in the Federal Register.
NCUA's board on Thursday also finalized a rule on fidelity bond and insurance coverage and approved two community charter conversions. It also announced the 2013 budget for Temporary Corporate Credit Union Stabilization Fund, which is 20 percent lower than the 2012 budget and contains no net change in staffing. (See related story.)
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