CUNA’s 18-member Examination and Supervision Subcommittee will take the lead in writing the trade association’s comment letter on the NCUA’s proposed derivatives rule, Senior Vice President Mary Dunn said Tuesday during a press call.
The group met with NCUA Director of the Office of Examination and Insurance Larry Fazio on May 21, Dunn said, and has scheduled a follow-up conference call for early June. The NCUA Board proposed the rule during its May 16 board meeting. If finalized, it would grant investment authority for plain-vanilla derivative swaps and caps to qualifying credit unions with more than $250 million in assets.
The proposed rule generated criticism because the NCUA also presented a possible fee structure to pay for the additional administrative and examination costs associated with the authority.
Application fees could range from $25,000 to $125,000; credit unions could also pay ongoing fees to cover the costs of additional examination time.
The regulator is considering the fees because it estimates derivatives authority could cost it as much as $16 million during the first three years, depending upon how many credit unions apply for it.
While Dunn said the NCUA doesn’t have the proper expertise on staff to set up and examine the program, she has heard from sources that include some within the NCUA who have said the “costs do seem to be a bit high.”
The NCUA said when it proposed the rule that it estimated between 75 and 150 credit unions will apply for derivatives authority. However, CUNA Chief Economist Bill Hampel said he would be surprised if more than 100 credit unions do so. While stressing he was just surmising a number, he said he thinks the actual number of participating credit unions will be closer to 50.
“Only a few hundred are eligible,” Hampel said, “And some will likely say it’s not worth the expense or going to the trouble of doing the trades.”
Other members of CUNA’s Examination and Supervision Subcommittee include Michigan Credit Union League President/CEO Dave Adams, NuVision FCU CEO Roger Ballard, Kemba Credit Union President/CEO Steve Behler, Metro Credit Union President/CEO Robert Cashman, Desert Schools FCU President/CEO Susan Frank, American Airlines FCU General Auditor Sean Gaven, Pacific Northwest FCU President/CEO Tom Griffith, Altura Credit Union President/CEO Mark Hawkins, Community First Credit Union President/CEO John Hirabayashi, Evangelical Christian Credit Union and NuVision FCU board member Jim LePere, Greater Nevada Credit Union President/CEO Wally Murray, USFCU President/CEO Bill Raker, Digital CU CEO Jim Regan, Pearl Harbor FCU Chairman Gordon Sam, Amplify FCU President/CEO Paul Trylko and Vision Financial Credit Union President/CEO Michael Waylett.