ALEXANDRIA, Va. (10/16/15)--Federal credit unions would have greater choices when investing in bank notes under a proposal issued for comment by the National Credit Union Administration board Thursday.
Though officially a technical correction to a regulation, the proposal would a degree of flexibility for credit unions in which bank notes they can purchase.
Current NCUA regulations allow federal credit unions to invest in bank notes with “original weighted average maturities” of less than five years. However, the term “original” has created confusion for some credit unions as to which securities are eligible for purchase.
The proposed rule would eliminate the term “original” and allow credit unions to purchase bank notes that had maturity terms greater than five years but have remaining maturities of less than five years.
NCUA Chair Debbie Matz said the idea from the proposal came from a call to the agency’s investment hotline.
“This proposed regulatory relief is another example of NCUA responding to thoughtful suggestions from credit union stakeholders,” Matz said. “We’re cutting unnecessary red tape and giving credit unions more options and flexibility in their investment decisions.”
The proposal was passed with a 2-1 vote. Board member J. Mark McWatters cast the dissenting vote, saying he agreed with the change but thought it went against procedure, since this section of regulation is scheduled to be reviewed by the agency next year.
The proposal will have a 30-day comment period, starting upon its publication in the Federal Register.
Thursday’s NCUA meeting also included an update on the National Credit Union Share Insurance Fund. According to NCUA Chief Financial Officer Rendell Jones, the fund maintained positive income and operating expense trends in the third quarter of 2015.
For the third quarter of 2015, the fund had a net income of $24.7 million, and it ended the quarter with an equity ratio of 1.29%. Third-quarter investment and other income totaled $56.8 million, operating expenses were $49 million and the provision for insurance losses was reduced by $16.9 million.
Seven federally insured credit unions failed during the third quarter, for a total of 11 in 2015. Total year-to-date losses associated with credit union failures are $9.9 million.