At last Friday’s NCUA Board meeting, perhaps the most important aspect of was a question from NCUA Board Member Gigi Hyland. Hyland questioned whether the National Credit Union Share Insurance Fund (NCUSIF) is over-reserved. This is important because any amount over the normal operating level of the Fund could be transferred to the Temporary Corporate Credit Union Stabilization Fund (TCCUSF), thereby reducing the total amount of assessments that credit unions owe to the TCCUSF. CUNA and the LSCU will be following up on this with NCUA. NCUSIF and Temporary Corporate Credit Union Stabilization Fund Reports NCUA staff reported that the NCUSIF’s equity ratio was at 1.29% as of May 31, 2011. The NCUSIF’s reserves stand at approximately $1.2 billion. NCUA reported there are currently 377 CAMEL 4 and 5 credit unions, which represent 4.75% of insured shares, or approximately $36 billion. NCUA staff also noted that there are 1,791 CAMEL 3 credit unions, which represent 17.13% of insured shares, or $130 billion. Combined, insured shares in CAMEL 3, 4, and 5 credit unions represent approximately 22% of total insured shares. Agency staff indicated that the Office of Examination and Insurance staff is currently analyzing the NCUSIF’s reserve levels and will complete that analysis by the end of June. The Stabilization Fund reported approximately $7.5 million in earned revenues (such as from “guarantee fee revenue” on NCUA Guaranteed Notes) and $447,850 in operating expenses for the month of May, resulting in an over $7 million dollar surplus from its operations. ANPR – Financial Derivatives Transactions to Offset Interest Rate Risk The Board approved an Advance Notice of Proposed Rulemaking (ANPR) with a 60-day comment period to reconsider permitting FCUs to engage in derivatives transactions for the purpose of hedging or offsetting interest rate risk (IRR), i.e., whether through approved third parties or independently. This is an important initiative and credit unions and leagues are strongly encouraged to weigh-in with the agency on it. Final Rule – Member Survey Sample Data to Meet Low-Income Designation The NCUA Board approved a final rule to amend Part 701 of its regulations to permit FCUs that do not automatically qualify for a low-income designation using the agency’s geo-coding software to submit an analysis of a statistically valid sample of member income data as evidence they qualify as a low-income credit union (LICU). An FCU may rely on a sample of member income drawn from loan files or a member survey provided the sample is a statistically valid, random sampling. The data sample must meet certain criteria and be accompanied by a narrative describing the sampling technique and evidence supporting the sample’s validity. The final rule is very similar to proposed rule, but includes new wording about not combining a survey and loan file review. Specifically, the rule emphasizes that a 1
sample has to be drawn entirely from loan files or entirely from the survey; no combination will be allowed, as there is no statistically valid methodology for combining a member survey and a loan file sampling approach. The final rule will be effective 30 days after publication in the Federal Register. Interim Final Rule – Technical Correction to Golden Parachute and Indemnification Rule The Board approved an interim final rule that provides a technical correction to the golden parachute and indemnification rule that is effective June 27. This interim final rule specifies that only § 457(b) plans under the Internal Revenue Code are excluded by definition from the term “golden parachute payment” and not any other types of plans under § 457. However, § 457(f) plans may also qualify as an exception to the golden parachute definition if such plans also meet the “bona fide” criteria under NCUA’s regulation. If you have any questions about the above topics, or other regulatory, or compliance questions please contact Vice President of Regulatory Affairs Bill Berg or Director of Compliance Scott Morris at bill.berg@lscu.coop or scott.morris@lscu.coop or by phone 866.231.0545 x1028 or 2165 respectively.
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