The NCUA Board unanimously approved Monday by notation vote an interim final rule that enhances the ability of the Central Liquidity Facility to serve as liquidity backstop to the nation’s credit union system.

“Liquidity, like capital, is a pillar of strength upon which the safety and soundness of the credit union system rest,” NCUA Chairman Rodney E. Hood said. “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 interim final rule enhances the NCUA’s regulations on the Central Liquidity Facility to supplement the legislative changes resulting from the CARES Act while adding even greater flexibility and relief for member credit unions. 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.

Specifically, the interim final rule:

• 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 becomes effective upon publication in the Federal Register, and it will expire Dec. 31, 2020.

The Central Liquidity Facility is a mixed-ownership government corporation created to improve the general financial stability of credit unions. It provides the credit union system a vital contingent source of funds to assist with system-wide liquidity events. Member credit unions own the Central Liquidity Facility, which exists within the NCUA. Joining the facility is voluntary.

In addition to these regulatory changes, credit unions have greater access to the Central Liquidity Facility because of the CARES Act. The CARES Act permits temporary access for corporate credit unions, provides greater flexibility to corporate credit unions serving as agent members, increases the fund’s borrowing authority temporarily, and provides the Central Liquidity Facility more flexibility when granting loans.

The NCUA will issue a Letter to Credit Unions with additional guidance on the regulatory and legislative changes to the Central Liquidity Facility soon.