Sept. 28, 2012 – Credit unions would face heightened balance-sheet risk under NCUA’s proposed rule on credit union access to emergency liquidity, NAFCU President and CEO Fred Becker told NCUA Chairman Debbie Matz Thursday.
During the most difficult periods of the financial crisis, especially in times when liquidity was difficult to obtain, NAFCU worked hard to ensure that credit unions have continued access to as many sources of liquidity as possible, including the Central Liquidity Facility, Federal Home Loan Banks, the Federal Reserve’s discount window and more.
“At that time, and still, we continue to believe that it is critical that credit unions’ access to all available liquidity sources remains intact and that credit unions have as much information as possible about emergency sources of liquidity,” Becker wrote.
NCUA has said it is proposing its rule on emergency liquidity in large part to address the fact that most credit unions will lose their access to the Central Liquidity Facility when U.S. Central Bridge closes down. Becker said NCUA’s concern as the administrator of the National Credit Union Share Insurance Fund is understandable, but the agency’s proposed action is not justifiable.
NAFCU is concerned about the brief list of sources NCUA has listed in its proposal as permissible sources of emergency liquidity. It also opposes NCUA specifying by rule which sources of liquidity credit unions must have access to in times of emergency. Becker said the proposed rule would increase systemic risk and open individual credit unions to potential drops in capital similar to those seen during the recent financial crisis.
Becker urged that NCUA hold back on any rulemaking to learn more about what credit unions are already doing to manage their liquidity needs. If a rule is issued, he said, it should include membership in Federal Home Loan Banks and investments in short-term Treasuries as options for meeting any backup liquidity requirement.
“NAFCU supports a viable CLF, but credit unions should have choices for their liquidity needs,” Becker wrote.