April 14, 2020

NCUA issues rule to enhance CUs' use of CLF

The NCUA Monday issued an interim final rule to enhance credit unions' use of the Central Liquidity Facility (CLF). The CARES Act provided flexibility for credit unions to access the facility, and this rule adjusts the agency's regulations to supplement the changes made by the legislation.

"We thank NCUA Chairman Rodney Hood, and Board Members Todd Harper and J. Mark McWatters for working to allow credit unions easier access to the Central Liquidity Facility," said NAFCU President and CEO Dan Berger. "The agency's recent changes are a very good step forward for the industry. 

"Credit unions are committed to helping their members overcome financial challenges, particularly as the coronavirus pandemic grabs hold of our economy. To this end, strong liquidity is vital to ensuring loans to struggling families and small businesses continue to flow within the credit union system."

Prior to passage of the CARES Act, NAFCU had urged Congress to make technical amendments to modernize the CLF so that credit unions can quickly access liquidity if needed.

"Liquidity, like capital, is a pillar of strength upon which the safety and soundness of the credit union system rest," NCUA Chairman Rodney Hood said in the rule's release. "While we hope for the best outcome, we must prepare for the possibility that the Central Liquidity Facility will be a vital resource to help credit unions respond to the consequences of the COVID-19 pandemic. The NCUA encourages any credit unions that are not members to join the Central Liquidity Facility as soon as possible, either as regular members or through an agent member."

The rule makes it easier for credit unions to join the facility as a regular member or through a corporate credit union as part of an agent relationship, and access emergency liquidity should the need arise. It specifically:

  • eliminates the six-month waiting period for a new member to receive a loan;
  • makes temporary amendments to the waiting period for a credit union to terminate its membership;
  • eases collateral requirements on some assets; and
  • allows, temporarily, for an agent member to borrow for its own liquidity needs.

The interim final rule will become effective once published in the Federal Register. It expires Dec. 31, 2020.

The NCUA previously offered insights into accessing the CLF in its coronavirus FAQs. It is set to receive a briefing on the facility during Thursday's board meeting.