Compliance Blog

Written by Ricardo Piñeres, Regulatory Compliance Counsel

On Friday, March 14, the NCUA released Supervisory Letter No. 14-03.  This letter provides federally-insured credit unions (FICUs) with helpful information regarding the exam process with respect to the NCUA’s liquidity and contingency funding rules that were released back in October and are located at 12 C.F.R. § 741.12.  The supervisory letter accompanies the release of the portion of the AIRES Questionnaire that has been added to cover the new liquidity and contingency funding rules.  The release of this information is especially helpful because examiners will be required to review the liquidity and contingency funding plans for all FICUs beginning on March 31 of this year.

The liquidity and contingency funding rules were promulgated as a way for the NCUA to ensure that FICUs of all sizes were conducting sound liquidity planning.  Furthermore, it required large FICUs (those with over $250 million in assets) to establish access to at least one federal source of contingent liquidity.

In order to be in compliance, FICUs with less than $50 million in assets must establish and maintain a basic written liquidity policy.  The policy must be approved by a FICU’s board of directors and must, at minimum, contain:

• The purpose and goals of liquidity management;
• Thresholds or limits for liquidity measures and reporting requirements;
• Primary and secondary contingency liquidity sources that the FICU can employ under adverse circumstances;
• Tools for liquidity risk management; and
• A provision for periodic review and revisions, as needed.

In addition to a written liquidity policy, in order to be in compliance, FICUs with assets of $50 million or more must have a contingency funding plan that clearly sets out strategies for addressing liquidity shortfalls in emergencies.  This plan must include policies, procedures, projection reports, and action plans designed to ensure that a FICU’s sources of liquidity are sufficient to fund operating requirements under contingent liquidity events.

Furthermore, FICUs with assets of $250 million or more must establish access to at least one contingent federal liquidity source.  The two federal liquidity sources that the NCUA has deemed allowable for this purpose are the Federal Reserve Discount Window and the Central Liquidity Fund.

In gauging whether or not they are in compliance with the rules, FICUs should consult the supervisory letter, the new AIRES questionnaire additions, and NCUA Letter to Credit Unions No. 13-CU-10 that contained guidance on how to comply with the liquidity and contingency funding rules.

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Free Kick.  The Premier League is heading into its final stretch of games with teams having 10 or fewer games left in the season (except for Manchester City and Sunderland who each have 11 games left).  While it appears that the Champions League spots are all but determined (it’s almost impossible to see any of the top 4 letting what is at least a 9-point gap back down to 5^th place Tottenham slip away), the championship and relegation battles will be fierce.

At the top end of the table, Chelsea leads by 4 points over both Liverpool and Arsenal, but Chelsea has played an extra game.  Manchester City trails the leaders by 6 points, but has played 3 games less than Chelsea and 2 less than both Liverpool and Arsenal.  As tight as the battle is at the top of the table, the battle to avoid relegation is even crazier with the bottom 8 teams are separated by just 6 points.

I am going to save my predictions for how it will all shake out in the Premier League for another time.  Instead, I’m going to honor March Madness and crown an EPL Madness Champion.  The teams have all been seeded according to the current Premier League standings with one exception – Manchester City has been given the benefit of the doubt in terms of their matches yet to be played and has been named the top seed.  Winners were determined solely by me taking into account recent form and my own personal biases.

Play-In Games: Crystal Palace, Hull City, Swansea, and Sunderland all advance.  West Brom, Fulham, Cardiff, and Norwich battle in a round-robin tournament for the one spot that is saved from relegation.  Cardiff survives and returns to the Premier League for next season.

Sweet 16: Manchester City, Arsenal, Liverpool, Everton, and Chelsea all advance comfortably.  Southampton squeaks by Newcastle 1-0 after a defensive resurgence.  Tim Sherwood’s lack of managerial experience shows again as he puts out an incoherent starting 11 that loses 2-1 to West Ham.  Aston Villa shock Manchester United in penalties and the David Moyes era comes to an end at Old Trafford.

Elite 8: Chalk reigns supreme as the top 4 seeds all move on.  In the only close fixture of the round, Arsenal has a lackluster offensive game, but the centreback combo Mertesacker and Koscielny clamp down to help the Gunners pull out a 1-0 victory.  Joe Hart has a sloppy game, but Man City’s attack is too much for Southampton.

Final 4: Man City’s offensive prowess is too much for Arsenal to handle; Man City eases to a 5-2 victory.  Liverpool continue their torrid run of late with 2 goals from Suarez and 1 from Sturridge to down Chelsea 3-1.

Championship Match: In front of a capacity crowd at Wembley, Man City storms out to a 2-0 halftime lead with goals from David Silva and Samir Nasri.  Liverpool strikes back in the second half to equalize the match with a pair of Luiz Suarez goals.  In the 87^th minute, Steven Gerrard heads home the winner off of a corner kick to give Liverpool the title.

Here is how the bracket shook out.