Compliance Blog

Written by Michael Coleman, Regulatory Compliance Counsel

We will keep today's post short and sweet, for those of you on the East Coast in the areas affected by Hurricane Sandy, stay safe. 

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Yesterday, October 29th, 2012, NCUA closed U.S. Central Bridge Corporate Federal Credit Union (U.S. Central Bridge).  Regarding the closure of U.S. Central Bridge, the NCUA press release quotes NCUA Chairman Matz:

“'We now have a stronger, safer system,' ... 'We have set high standards for corporate credit union investments, capital and governance, and we’ve created a new operating environment for wholesale corporate credit unions to serve retail credit unions. The decisions NCUA and credit unions made have produced a solid foundation for the future.'"

The press release also emphasizes  that with the closure of the U.S. Central bridge, many credit unions who had access to emergency liquidity from the Central Liquidity Facility (CLF) through U.S. Central Bridge will no longer have access unless they join the CLF directly. In July, 2012, NCUA proposed a rule requiring credit unions to plan for or maintain access to emergency liquidity. The press release summarizes the requirements of the proposed rule:

"The proposed rule incorporates a three-tiered approach, based on the size of the federally insured credit union:

• Credit unions under $10 million in assets would have to maintain a written liquidity policy approved by their board. The policy would provide a basic framework for managing liquidity and have a list of contingent liquidity sources for use in emergency situations.
• Credit unions with more than $10 million in assets would have to establish a formal contingency funding plan that clearly sets out strategies for addressing liquidity shortfalls in emergency situations.
• Credit unions with more than $100 million in assets would have to demonstrate access to at least one of the following three options for a backup federal liquidity source:
  • becoming a direct member of the CLF;
  • becoming an indirect CLF member through a CLF agent; or
  • establishing direct borrowing access to the Federal Reserve’s Discount Window."

The press release also quotes NCUA Chairman Matz on the need for this proposed rule: 

“'Credit unions have access to everyday liquidity needs through their balance sheet, and through correspondent relationships such as corporates or Federal Home Loan Banks,' Chairman Matz noted. 'But in the event of another systemic crisis, it is also critical for larger credit unions to have demonstrated access to a dependable source of government-backed emergency liquidity, such as NCUA’s CLF or the Federal Reserve Discount Window. That’s why the NCUA Board proposed the emergency liquidity rule.'”

The press release also provides a link to a video on the CLF on NCUA's YouTube channel.

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NAFCU Closed.  NAFCU follows the Federal Government Operating Status and our offices will continue to be closed today, October 30th, due to Hurricane Sandy.  NAFCU Members:  If you have compliance questions, please email us at compliance@nafcu.org.  If you call, please leave a voicemail and we'll get back to you as soon as we can.   

For those in and around the Hurricane area, be safe!