ALEXANDRIA, Va.—By a 3-0 vote, the NCUA board Thursday approved an amendment to the agency’s investments rule that allows federal credit unions to select from a much larger pool of possible bank note offerings.
The previous investment regulation limited federal credit unions to investing in bank notes “with original weighted average maturities of less than five years.” The final rule removes the word “original” from the text of the regulation, thereby allowing federal credit unions to purchase bank notes that had original maturities of greater than five years but still have remaining maturities of less than five years.
Chairman Debbie Matz, emphasizing that this proposal became a final rule in only five months, reminded CUs that the rule change resulted from a call to NCUA’s Investment Hotline.
“The caller suggested that removing just one word from the investments rule would remove an unnecessary limit on federal credit union investments,” said Matz. “As soon as we looked into this suggestion, we found that the limit was not only unnecessary, it was unintended.”
Matz stated that the agency “truly appreciates” anyone who takes the initiative to let NCUA know about any unintended consequence of their rules, policies or procedures.
“I always encourage stakeholders to share ideas for changes that would not affect safety and soundness, but would enable credit unions to conduct their business more efficiently,” she said. “All stakeholders have the ability to provide input beyond the formal comment process. Anyone can access NCUA by phone, mail, or email, if not in person at public meetings.”
Matz said that many of the “best regulatory modernization ideas” have come from credit union officials.
“For example, it was a credit union manager who suggested using NCUA data to pre-approve low-income designations,” Matz explained. “And it was a credit union volunteer who suggested automating troubled debt restructuring to keep more members in their homes.”
Matz reminded that while NCUA is planning to propose more comprehensive regulatory relief in its investments rule by the end of 2016—which could be finalized in the second half of 2017, “There is no good reason to wait another year to finalize this single piece of regulatory relief on bank notes today. Good governance is about being responsive to stakeholders, not adding unnecessary layers of bureaucracy.”
Matz noted that other regulatory relief provisions NCUA is considering for its investments rule will take more time, since they are more complex.
According to Matz, the final rule will expand the bank note offerings available to federal credit unions, lower the execution prices, and diversify federal credit unions’ investment portfolios.
NAFCU stated that it supports the expanded authority of federal credit unions to invest in bank notes.
"NAFCU and our members welcome the agency's efforts to grant credit unions greater flexibility in their investment opportunities, offering much-needed regulatory relief," said Executive Vice President and General Counsel Carrie Hunt. "However, we would fully support NCUA doing more to expand the range of investment options available to federal credit unions."