ALEXANDRIA, Va. — The NCUA's proposed liquidity rule, which would require federally insured credit unions with more than $100 million in assets to establish Central Liquidity Facility or Federal Reserve Discount Window access, did not include the Federal Home Loan Bank as an emergency liquidity option.

Regarding the FHLB, the NCUA Board said at its Tuesday meeting that it is important to draw a distinction between ordinary funding and emergency liquidity.

“FHLB is certainly one way a credit union can diversify to guarantee a smooth flow of funding for ordinary operations,” the NCUA said. “The board recognizes, however, that the FHLBs are private institutions which are not obligated, and may not be able, to meet emergency liquidity demands in the same way the Discount Window and CLF are statutorily designed to do.”

NAFCU released a statement in response to the proposed rule, saying the trade does not support the backup liquidity source requirement for any credit union.

“NAFCU recommended that the agency include the option to maintain membership in one of the Federal Home Loan Banks and to maintain a percentage of highly liquid assets, not just Treasuries, in any final rule. We are disappointed that the NCUA failed to provide credit unions with at least these additional options,” said NAFCU President/CEO Fred Becker.

The board said it is also exploring whether certain Basel III liquidity measures and monitoring tools should be incorporated into NCUA's supervisory expectations for credit unions with more than $500 million in assets.

Basel III's proposed standards could include the use of a liquidity coverage ratio and a net stable funding ratio, as well as liquidity monitoring tools to track maturity mismatches on the balance sheet, funding concentrations and the amount of unencumbered assets available for secured borrowing.

“These measures and monitoring tools are designed to enhance the liquidity risk management framework and improve the banking sector's ability to absorb shocks arising from financial and economic stress,” the NCUA Board said. “NCUA must similarly consider the impact that its very largest FICUs could have on the liquidity of the credit union system and the NCUSIF by virtue of their size, complexity, and potential interconnectedness.”

The board is requesting comment on the costs and benefits of applying the Basel III liquidity standards to large credit unions.

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Onsite Coverage: NCUA Says FHLB Isn&rsquo;t an Emergency Liquidity Provider

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Onsite Coverage: NCUA Says FHLB Isn’t an Emergency Liquidity Provider