NCUA finalizes derivatives rule, requests feedback on NOL
The NCUA board issued a request for comment on the Normal Operating Level (NOL) policy and finalized its rule on derivatives at its Thursday meeting. The board also heard an update on the National Credit Union Share Insurance Fund for the quarter ending March 31.
The NOL is the desired equity ratio for the NCUSIF.
NCUA adopted a policy for setting the NOL in 2017, establishing a periodic review of the equity needs of the NCUSIF.
According to NCUA, the current economic landscape and pending obligations of corporate credit union asset management estates and associated NCUA Guaranteed Notes program warrant that the agency revisit its NOL policy.
The board sets it at between 1.20% and 1.50%, and CUNA supports NCUA working to maintain the NOL at 1.30% whenever possible.
The derivatives final rule is intended to modernize NCUA’s regulation 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 federal credit unions with at least $500 million in assets that have a CAMEL rating of 1 or 2.
CUNA supported the rule, as it would expand credit unions’ authority to purchase and use derivatives for purposes of managing interest rate risk.
The Share Insurance Fund reported a net income of $67.0 million and a net position of $19.7 billion for the first quarter of 2021. The Fund’s total assets increased to $19.8 billion at the end of the quarter from $19.1 billion at the end of the fourth quarter of 2020.