CUNA Wants Derivatives, Changes in NCUA Proposals
Now CUNA has weighed in with its proposed changes to NCUA’s suggested rules for permitting credit unions to invest in derivatives.
This follows on earlier comments from NAFCU.
Both associations agree that credit unions ought to be able to use derivatives to hedge investment risks, a policy that in broad strokes is what the agency is proposing.
“Investing in derivatives has the potential to help many credit unions,” said Mary Dunn, CUNA deputy general counsel. “Derivatives can prove useful in managing interest rate risks. “
She added, “Often we have criticized the agency for too much regulatory intrusion, but here we believe they are on the right track.”
CUNA, for its part, offered in a letter released Wednesday a detailed list of suggested changes to the NCUA proposal.
One overriding suggestion is opening up the number of approved derivatives vendors, “which may lead to access to different products and more competitive pricing for credit unions,” said CUNA.
Among the other CUNA suggestions are:
“Instead of limiting involvement in derivatives to 250% of net worth, a credit union should be able to use derivatives to hedge up to 100% of its fixed rate loan portfolio.”
”A credit union board should not have to approve each transaction in its day-to-day operations.”
“Well-managed credit unions of all sizes, including smaller credit unions, should have access to derivatives to hedge IRR [Interest Rate Risk] as part of their effective risk management program, should they choose to engage in such activities.”