Derivatives proposal provides additional IRR flexibility

January 4, 2021

NCUA’s proposed changes to its derivatives rule retain key components while providing flexibility, CUNA wrote to the agency. The proposal was issued in October and is intended to modernize NCUA’s derivatives rule and make it more principles-based.

Specifically, it would eliminate some of the existing prescriptive requirements in the derivatives rule, including removal of the application process for FCUs with at least $500 million in assets that have a CAMEL rating of 1 or 2.

“We support the proposed rule. We believe the proposal retains key safety and soundness components, while providing more flexibility for FCUs to manage their interest rate risk (IRR) through the use of Derivatives,” the letter reads. “We believe the changes will streamline the regulation and expand credit unions’ authority to purchase and use Derivatives for the purpose of managing IRR.”

CUNA also asked the agency to monitor certain proposed changes to ensure relevant sections of the rule continue to achieve their stated purposes, such as changes to the section pertaining to regulatory violations.