Just Say No: NAFCU on NCUA’s Liquidity ANPR
In a blunt document, the National Association of Federal Credit Unions has come out with a big no in regard to the recent NCUA Advanced Notice of Proposed Rulemaking (ANPR) designed to force credit unions to get in place approved liquidity.
NAFCU, in its comments, joins a parade of opponents of the proposed rule.
In its written comments -- signed by Dan Berger, executive vice president, government affairs -- NAFCU said, "As a general matter, NAFCU does not support the contemplated regulatory requirement. Without a doubt, FICUs should ensure that they have adequate sources of liquidity they should turn to in cases of emergency. However, imposing a regulatory requirement is not the appropriate approach."
Earlier in February, in an interview with NAFCU CEO Fred Becker that focused on liquidity, Becker had intimated his trade association’s opposition to the ANPR. At that time, he told Credit Union Times, “First and foremost we are hearing about the exclusion of the Federal Home Loan Banks - they are excluded from liquidity. They are not an alternative. They should be.”
In its ANPR NCUA itemizes four routes to approved liquidity - two revolve around funding the Central Liquidity Facility (directly or through a corporate), a third is demonstrated borrowing ability at the Fed’s Discount Window (which traditionally has hefty collateral requirements), and the fourth is holdings in Treasuries.
Said Berger in the NAFCU statement, “We believe the agency has unnecessarily restricted to four the number of sources that would meet the regulatory requirement, two of which are directly tied to the CLF thereby increasing concentration risk within the industry."
Berger added, “While they are not lenders of last resort, FHLBs are a vital source of liquidity. And, the fact that a large proportion of FICUs that hold mortgages are members of a FHLB, along with the notable increase in credit union FHLB membership in recent years, should, without question, lend to the conclusion that NCUA’s contemplated regulation includes FHLB membership as an option to meet the proposed requirement.”
Becker, in the Credit Union Times interview, stressed, “Liquidity is important. But what business model does the industry want?” In its filing NAFU has made clear it does not believe the NCUA ANPR is that model.