WASHINGTON (7/25/13)--The Credit Union National Association supports the National Credit Union Administration's efforts to solicit comments on a proposal to authorize derivatives to manage interest rate risk (IRR), but "does not support a number of the key provisions in the proposal," CUNA's Deputy General Counsel Mary Dunn said in a recent comment letter.
Comments on the proposal are due by July 29. CUNA's letter was developed under the auspices of the CUNA Examination and Supervision Subcommittee, with broad input from the credit union system.
CUNA's board earlier this month specifically reviewed this issue and all members of the board agreed one aspect under consideration in particular is of deep concern: Whether application and supervision fees should be imposed in order for credit unions to gain derivatives authority.
CUNA adamantly opposed this approach. "If derivatives reduce IRR, then NCUA should be encouraging credit unions to make appropriate use of permissible derivative options instead of retiring barriers to their use, such as fees to apply or for supervision," Dunn said.
"An à la carte fee structure sets a precedent that, if applied to other products and services, could stifle innovation for credit unions by imposing additional burdens and costs that are simply not justified," the CUNA letter emphasizes. "We feel that it is incumbent upon NCUA to develop the expertise necessary to enable it to properly regulate the evolving business model of a credit union without imposing extra changes," Dunn stated.
Other issues of concern addressed by Dunn in the comment letter include:
Ultimately the comment letter states that the requirements in the rule will prove so costly to meet that most credit unions will choose not to seek derivatives authority because their benefits will not out weight the costs.
"This is a very important proposal, for many reasons. CUNA strongly supports the agency's efforts to move forward with a derivatives rule" but "at the same time we urge the agency to make the key revisions we are advocating in order to ensure the program will be as accessible as possible to mitigate IRR as broadly as possible," Dunn said.