ABA: NCUA CUSO Proposal Not Strong Enough
The American Bankers Association has weighed on the NCUA’s CUSO rule amendment.
In its Aug. 16 letter, it calls for the regulator to amend its prompt corrective action regulations “so that once a credit union becomes significantly undercapitalized there is a presumption of a restriction on investments with CUSOs.”
“And a critically undercapitalized credit union should not be able to engage in any transaction with a CUSO without first receiving an approval from the NCUA. This would be consistent with the approach followed by the Federal banking regulators,” wrote Keith Leggett, ABA vice president and senior economist.
The ABA said some state laws “have significantly higher CUSO investment limits than the Federal Credit Union Act, which would cause the CUSO investment to represent a significant contingent claim on the net worth of an undercapitalized FISCU.”
Leggett also pointed out several credit unions that he believes failed because of CUSO connections.
The NCUA has received nearly 70 comment letters on its proposal.