TIPS,Rural Districts Approved
The NCUA Board presided over a monthly board meeting Feb. 21 that concerned mostly positive news for credit unions. Two new rules that expand investment powers and field of membership reach were approved. And year-end share insurance statistics showed improved CAMEL scores and legacy asset performance.
An approved final rule will expand the maximum threshold for rural district field of membership populations to 250,000, an increase over the current 200,000 maximum. The rule also includes a new caveat that the district not exceed 3% of the state’s total population.
Chairman Debbie Matz said when the board revised the limit in 2010, it wrestled with settling upon an appropriate number and chose 200,000 thinking it could be revised if needed. Credit unions in high-population states like Texas, New York and California told the NCUA it was too restrictive. And, Matz said she met one credit union CEO in South Dakota who said the limit kept him from serving a nearby Native American reservation. Reservations are typically financially underserved, Matz said, so raising the limit is a “move in the right direction” toward fulfilling the rule’s intent to serve underserved areas, as well as showing responsiveness to credit union feedback.
NAFCU Legal Counsel Carrie Hunt said she was pleased with the increase but said her trade was pushing for a higher 500,000 threshold. NCUA Staff Attorney Elizabeth Wirick had told the board when presenting the rule that a 500,000 limit was close to the entire population of seven states and the District of Columbia.
Hunt said that shouldn’t stop the NCUA from approving 500,000.
“The NCUA has stated an entire state can’t be a rural district, but I think it’s more of a policy argument than a legal one,” she said.
The rule will take effect 30 days after it is published in the Federal Register.
A second approved final rule allows credit unions to purchase Treasury Inflation Protected Securities. The rule was first presented as an audience question during a 2012 town hall hosted by Matz. Aside from cautions by staff that credit unions fully understand TIPS accounting and interest rate risk modeling before investing, the investment was approved and will be permitted 30 days after it is published in the Federal Register, which puts it on target for near the end of the first quarter.
The board was also presented with share insurance fund year-end numbers, which showed improved CAMEL scores in 2012. As of year-end, 369 credit unions were rated CAMEL 4 or 5, which represents just 2.% of insured shares. That’s an improvement from the end of 2011, when 409 were CAMEL 4 or 5 putting 3.3% of insured shares at risk.
Twenty-two credit unions failed in 2012. Fourteen were involuntarily liquidated and eight were assisted mergers. That number marks an increase over the 16 credit unions failed in 2011.
CUNA President/CEO Bill Cheney said he was pleased with the positive news to come out of the meeting.