Newsroom
NAFCU to NCUA: Raise permissible interest rate ceiling
NAFCU Vice President of Regulatory Affairs Ann Kossachev wrote to the NCUA Thursday urging the agency to immediately raise the permissible interest rate ceiling to mitigate unnecessary interest rate risks facing federal credit unions. Kossachev urged the NCUA to establish a floating permissible interest rate ceiling equal to a 15 percent spread over the prime rate or alternatively extend the 18 percent permissible interest rate ceiling for the maximum allowable period of 18 months, no fewer than 90 days before its scheduled expiration on March 10, 2023.
Under the Federal Credit Union (FCU) Act, the NCUA Board in coordination with Treasury, relevant congressional committees, and other federal agencies, has authority to raise the permissible interest rate ceiling if money market rates have risen over the past six months or if prevailing interest rate levels threaten the safety and soundness of individual federal credit unions.
“Contemporary economic conditions plainly warrant the NCUA Board’s immediately raising the permissible interest rate ceiling,” wrote Kossachev.
When the NCUA extended the expiration of the 18 percent permissible interest ceiling in June last year, the federal funds rate rested below 0.1 percent, as did each of the 1-month, 3-month, 6-month and 1-year Treasury rates; between the start of 2022 to today, the federal funds rate has more than tripled to 0.33 percent. The FOMC also announced in March that it would begin reducing its balance sheet, which quickly led to the increase of the prime rate by 25 basis points to 3.5 percent. The FOMC announced an additional 50 basis point increase yesterday.
“Against this backdrop of rapidly rising key interest rates, thousands of individual federal credit unions across the country face a wide range of material risks to their well-being,” Kossachev noted. “However, few contemporary risks, if any, are as dire as the elevated and accelerating risks to federal credit unions’ earnings.”
Kossachev strongly encouraged the NCUA to establish a floating permissible interest rate ceiling equal to a 15 percent spread above the prime rate, noting that the adoption or maintenance of any fixed rate ceiling “leaves the credit union system unnecessarily exposed to all too obvious interest rate risks.”
Read the letter. NAFCU continues to advocate for ways federal credit unions can mitigate unnecessary interest rate risks during this critical period of economic recovery.
Share This
Related Resources
Add to Calendar 2024-04-23 14:00:00 2024-04-23 14:00:00 Monitoring the Latest Litigation Risks Credit unions’ operations pose litigation risks, with more of these cases being filed as class action lawsuits. In this Monitoring the Latest Litigation Risks for Credit Unions webinar, you’ll review some of the specific kinds of lawsuits impacting credit unions and what potential claims could be on the horizon. You’ll also examine some options for mitigating risks. Key Takeaways Review the current lawsuit trends. Understand the potential claims risks Explore options for mitigating risks. Register Now $295 Members | $395 Nonmembers(Additional $50 for USB)One registration gives your entire team access to the live webinar and on-demand recording until April 23, 2025Go to the Online Training Center to access the webinar after purchase » Who Should Attend NCCOs NCRMs Compliance and risk titles Education Credits NCRMs will recieve 1.0 CEUs for participating in this webinar NCCOs will recieve 1.0 CEUs for participating in this webinar Web NAFCU digital@nafcu.org America/New_York public
Monitoring the Latest Litigation Risks
Credits: NCCO, NCRM
Webinar
The Bottom Line on Insurance Tracking and Collateral Protection
Strategy
preferred partner
Allied Solutions
Blog Post
Resiliency In Your Incident Response Plan
Cybersecurity
preferred partner
DefenseStorm
Blog Post
Add to Calendar 2024-04-15 09:00:00 2024-04-15 09:00:00 Mergers and Acquisitions: Unifying Two Different Executive Total Compensation and Benefits Programs Listen On: Key Takeaways: [03:50] With the merger of a smaller credit union into a larger one you are really only dealing with integrating staff into the larger credit union. [05:53] When working with a merger of equals we start with a deep dive into the executive compensation and benefits of each organization. [09:09] If your current executive benefits provider doesn’t conduct regular plan evaluations, consider having a plan audit anyway. [13:46] Don’t overpay for these things if you don’t have to. When you have more options available that means the cost is more appropriate. [17:11] It is in a unified organization’s best interest to do tier timelines where we look at your top executives who are critical to the unified organization’s success today and then slowly add in the next levels. Web NAFCU digital@nafcu.org America/New_York public
Mergers and Acquisitions: Unifying Two Different Executive Total Compensation and Benefits Programs
preferred partner
Gallagher
Podcast
Get daily updates.
Subscribe to NAFCU today.