Final bank notes rule unanimously approved by NCUA board

March 25, 2016

ALEXANDRIA, Va. (3/25/16)--Credit unions now have increased flexibility when it comes to bank notes, thanks to a final rule approved by the National Credit Union Administration (NCUA) board Thursday. The final rule is identical to the rule first proposed in October 2015.

The rule amends the maturity requirement for bank notes to be a permissible investment for federal credit unions by removing the word “original” from the current requirement that bank notes have “original weighted average maturities of less than five years.”

This permits federal credit unions to purchase bank notes with original maturities of greater than five years but remaining maturities of less than five years. The weighted-average maturity of less than five years also will maintain safety and soundness by avoiding excessive interest rate risk, according to the NCUA.

The Credit Union National Association supports the proposal, believing by easing credit union access to bank notes will result in more flexibility and greater efficiency in finding suitable bank note offerings

According to NCUA Chair Debbie Matz, the genesis of the rule came from a call to the agency’s Investment Hotline.

“We looked into this matter and found the limit was not only unnecessary, but unintended. So, we’re making this change today to expand bank note offerings available to federal credit unions and diversify investment portfolios,” she said.

The rule will be effective 30 days from publication in the Federal Register, which is expected in the coming weeks.