Compliance Blog

Written by Steve Van Beek

The NCUA Board had a busy day yesterday with a full agenda.  The results of the Board meeting can be found here.  Additionally, the Board Action Bulletin provides a summary of each item.

The proposed changes to NCUA's Reg Flex rule are summarized in the Board Action Bulletin:

"The proposed rule would eliminate the charitable contributions rule and add relief provisions to rules that apply to eligible obligations, nonmember deposits, fixed assets, and investments. Under the proposed changes, FCUs would no longer have to qualify for a specific “RegFlex” designation. As of June 30, 2011, 60% of FCUs (2,764 of 4,534) were designated as RegFlex FCUs. The proposed changes would extend regulatory relief to the remaining 1,770 FCUs that do not currently have a RegFlex designation.

The RegFlex relief proposed rule has seven components. Specifically, the proposal would allow all FCUs to:

• Make charitable contributions to charities of their choosing;
• Accept non-member deposits, subject to predetermined limits, from local governmental entities or other credit unions;
• Use a six-year time horizon to partially occupy unimproved property they acquire for future expansion;
• Obtain certain exceptions to eligible obligations constraints;
• Enter into borrowing repurchase transactions in which the purchased securities have maturities that exceed the maturity of the borrowing repurchase agreement, provided the investment value does not exceed net worth, and subject to certain mismatch timing constraints;
• Purchase private-label commercial mortgage-related securities, subject to certain net worth constraints and four safety and soundness investment criteria; and
• Invest in zero-coupon securities, subject to certain net worth or investment maturity limits.

The proposal is issued with a 60-day comment period."

The draft version of the proposed rule is here.  It will be published in the Federal Register in the upcoming days.

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NCUA also proposed a rule on loan participations that would extend the rule to all federally insured credit unions.  Additionally, the proposed rule addresses retention requirements, underwriting and concentration limits.  Here is from the Board Action Bulletin:

"Under the proposed rule, originators would be required to retain 10% of the original loan risk. (FCUs are already subject to this requirement.) Underwriting standards for loan participations must meet or exceed the underwriting standards that each purchasing credit union uses for originating their own loans. Credit unions buying participation interests must establish parameters for reviewing loan documentation, and for performing on-going due diligence on purchased loans.

Buyers would also be protected from acquiring undue concentrations. Loan participations purchased from one originating lender could not exceed 25% of net worth. Participation loans to one borrower could not exceed 15% of net worth. Credit unions could apply to NCUA Regional Directors for waivers of these limits."

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NAFCU will be producing Regulatory Alerts on both of these proposals.  

Have a great weekend everyone!