New Corporate Rules Focus on Capital, Investments, Disclosure
There would be a 4% minimum leverage ratio (5% to be considered well-capitalized), 4% tier one risk-based ratio (6% to be well-capitalized) and 8% total risk-based capital ratio (10% to be well-capitalized).
The three-year term requirement for nonperpetual contributed capital account would be expanded to five years and would forbid corporates from redeeming contributed capital before maturity without the approval of their regulator.
Each corporate would be assigned one of five capital categories and eliminates the special treatment that wholesale credit unions receive in terms of their retained earnings reserve requirements.
The proposal would also prohibit investments in collateralized debt obligations and net interest margin securities and would require that at least 90% of a corporate's investments be rated by at least two ratings organizations.
It also would place limits on types of investments in any one investment type. No one kind of investment can be more than the lower of 500% of capital, 25% of assets or the lower of 1000% of capital and 50% of assets.
Corporates would be allowed to borrow only for liquidity purposes and only for a maximum maturity of 30 days. They would be banned from accepting any investment if after the investment from a member or entity would exceed 10% of its assets.
The rules would also require all corporate credit union board members be a chief executive officer, chief financial officer or chief operating officer of a credit union or member entity. All senior officer and board member compensation must be disclosed.
Board members could serve for no more than six years at one time, and no person could serve on the board of more than one corporate credit union. Also, no more than one person from any one credit union or other entity can serve on the same corporate credit union's board.
The corporate governance would not be retro-
active and would not mandate that corporate credit unions remove any existing board members but
would go into effect next time those board members are up for election.
There will be a 90-day public comment period on the proposed rules, and NCUA Chairman Debbie Matz said there will be in-person and virtual town hall meetings during that period.
Matz described the rules package as "well thought out" and the risk management proposals will hopefully avoid a repeat of some of the problems that corporate credit unions have faced during the recent economic downturn.
The board also approved a $200.9 million budget for 2010. That it is a 13% increase over the current budget and includes funding for 74 new positions.
Of those new positions, the largest single increase will be 39 new examiners and 12 problem case officers
The agency's new Office of Consumer Protection will require seven new positions as well additional positions transferred from other parts of the agency.
It also establishes an Office of Chief Economist, which NCUA Executive Director David Marquis said would provide an independent analysis of macroeconomic trends and help the agency spot regional trends at an early stage so that it can be more proactive in helping credit unions through difficult times.
The board also approved an overhead transfer rate-the funding that comes from federal credit unions to pay for the agency's regulatory activities-of 57.2%, an increase from the current rate of 53.8%.
The board also approved a 1.58% decrease in the operating fee for natural person credit unions and increased the asset level dividing points for determining the fees by 8.5% to reflect asset growth.
NCUA Chief Financial Officer Mary Ann Woodson told the board that as a result of the sluggish economy, 5.58% of all insured shares are in credit unions with CAMEL 4 or 5 ratings, and there are 337 credit unions with such ratings.
By contrast, at the end of December there were 271 credit unions with those ratings.
In addition, there are 1,637 credit unions with CAMEL 3 ratings, compared with 1,540 at the end of last December.
There have been 22 credit union failures during
the first 10 months of 2009, compared with 18 for all of last year.