ALEXANDRIA, Va. (UPDATED: 5/16/13, 11 a.m. ET)--Well-run federal credit unions would be permitted to use simple derivatives to hedge against interest rate risks under a just-proposed National Credit Union Administration program.
Under the terms of the NCUA proposal, only credit unions that have assets of more than $250 million, are well-managed, and have the appropriate expertise will be eligible to apply for an agency derivatives investment program. Swaps and caps will be the only approved derivatives investments, the NCUA said. There will be an application process, and fees will be charged to cover costs related to application processing and supervision.
The NCUA estimated that 75 to 150 credit unions would apply for derivatives authority within the first two years of the program. The agency said it would need to add new resources to handle application processing and supervision if the program is approved.
The agency is seeking comments for 60 days on the proposal.
The Credit Union National Association is reviewing the proposal in detail and will work with its Examination and Supervision Subcommittee to develop its comments CUNA urges any credit unions interested in engaging in these investments to share their reaction to the proposal and to flag problem areas as well as favorable provisions they identify.
While CUNA commend the agency's decision to move forward on this issue, CUNA plans to urge that the final rule not be so restrictive that it discourages well run credit unions that meet the proposal's criteria from applying for derivatives authority.
A board briefing on a supplemental interagency proposed rule that covers appraisals for higher-priced mortgage loans, and a final rule making technical adjustments to credit union regulations are also on today's open meeting agenda.
For more on the NCUA May board meeting, see Friday's News Now.