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June 23, 2017

NCUA finalizes safe harbor update; addresses asset securitization

The NCUA Board on Friday finalized its safe harbor rulemaking with respect to asset securitization and said it would not be moving forward with its asset securitization rulemaking, deeming it unnecessary because it determined that a federal credit union already has the authority to issue securities as part of its incidental powers.

Guidance for credit unions on asset securitization will be available in the next three to four months. In the meantime, the NCUA has issued a legal opinion letter on federal credit unions' authority to issue and sell securities. This legal opinion applies only to federal credit unions.

"We are pleased to see that the NCUA is recognizing securitization as an incidental power," said NAFCU Regulatory Affairs Counsel Ann Kossachev. "Securitization gives credit unions another option as they seek to manage their assets in a changing rate environment. We look forward to working with the NCUA going forward to ensure the forthcoming guidance incorporates suggestions that NAFCU has raised."

The letter clarifies the NCUA Office of General Counsel's reasoning in finding that credit unions have incidental powers to issue securities. It also notes that before a federal credit union begins securitizing any assets it "may complete and submit an application to engage in the activity because it is not an activity that is preapproved under NCUA's regulations as being within a credit union's incidental powers."

The NCUA's safe harbor rulemaking, approved Friday, will provide a safe harbor for assets transferred by a federally-insured credit union as part of a securitization or participation. The rule will be final 30 days after its publication in the Federal Register.

The NCUA Board on Friday also:

  • issued a proposal on the overhead transfer rate methodology;
  • received a briefing on the Enterprise Solution Modernization Program, which the NCUA expects will increase efficiencies and offer an improved user experience when in place;
  • issued a final rule on Part 747, Statutory Inflation Adjustment of Civil Money Penalties;
  • issued a final rule on Part 792, Freedom of Information Act; and
  • issued a proposed rule on Part 704, Corporate Credit Unions, with respect to capital calculations.

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