WesCorp CEO Criticizes Proposed Regs
Writing the letter to assist members in preparing their own comments for the NCUA, the WesCorp chief executive specifically objected to the regulator's proposed certificate premium redemption restriction, new NEV tests, and asset-weighted average-life limits applied to member loans.
Perkins, who previously ran Delaware Investments' mortgage-backed securities unit and was a managing director of global markets at Deutsche Bank in London, said, "If WesCorp had to adjust the paid yield to compensate the holder-buyer for the inability of its investment to go over par price, we would not issue certificates because we would not be able to offer investments that would not lose money."
He said proposed NEV tests are so restrictive, they "prevent corporates from doing business altogether." An all-Treasury portfolio would pass the new NEV test, he said, but would not produce retained earnings and would actually lose money.
Furthermore, applying proposed asset-weighted average-life limits to member loans could entice corporates to "up-price loans" to counter using up weighted average-life capacity, he said.
"This would profoundly restrict the likelihood of corporates being able to serve any of your mid- to long-term liquidity needs-one of the driving ideas behind the original foundation of the corporate credit unions," he said.
NCUA Director of Public and Congressional Affairs John McKechnie reacted to the letter by saying, "The comment period on the proposed corporate rule is open until March, and NCUA welcomes any and all responsible input. The opinions received will be instrumental in the NCUA's work toward reforming the corporate system."