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ALEXANDRIA, Va.-The major credit union trade associations have expressed great approval for the NCUA’s recent issuance of an Advance Notice of Proposed Rulemaking (ANPR) on credit union investment authorities. While specifics are still at the drawing board stage, the lobby groups were not afraid to speak up. “I was very pleased to see them put something out on investments.”NAFCU President and CEO Fred Becker said. “It was wide open. I didn’t see any bounds in it at all.” At the October NCUA Board meeting, NCUA Board Member Geoff Bacino emphasized that he was glad that credit unions would be able to tell the regulators what they want rather than the other way around. The ANPR calls on credit unions and interest groups to respond to a series of suggestions. Should amended broker requirements be part of minimum criteria for a federal credit union to adopt when using a broker or should NCUA put them in place? What investment authorities should NCUA continue to prohibit? Should NCUA raise the cap on discretionary control of investments? The ANPR was issued with a 90-day comment period. “This will be an operation comment because we want credit unions to weigh in on this,” CUNA Assistant General Counsel Michelle Profit said. “It’s really important.” She noted that CUNA’s operation comment has been successful in drumming comment letters from credit unions in the past, pointing to the 1,455 responses CUNA received on NCUA Chairman Dennis Dollar’s Regulatory Flexibility proposal. “Credit unions have a lot of time to look at this and I hope they do,” Becker commented. NAFCU Senior Vice President and General Counsel Bill Donovan remarked that it is an “important thing to note that they did not issue a proposed rule.” According to Donovan, the ANPR process invites more diverse response to the issue. He added that comment was not only welcomed by the board members, but also encouraged. Becker pointed out that the investment proposal was particularly important in light of the discussion of eliminating the Treasury bills. Prior to September 11 when the government was in the black and had a significant income, there was talk of getting rid of the Treasury bills. With the economic downturn following the attacks, that move is unlikely for the time being. But, when the economy moves upward again, the issue is likely to resurface. Credit unions are fairly limited in their investment choices, one of those being the Treasury bill. “You don’t want to be tied to any specific group of investments,” Becker explained. “To protect against risk, you have to have your investments over a wide range.” The board’s proposal could significantly aid credit unions in this area. NAFCU would support certain modifications in managing a portfolio, including derivatives, short sales, and stripped mortgages. “A lot of people look at derivatives and say `Oh my God, it’s a horrible thing,’ ” Becker said. He believes that in moderation, these things would not endanger safety and soundness, but actually bolster it. While Profit said it would be premature to discuss specific recommendations from CUNA, she did note that CUNA’s Federal Credit Union Subcommittee, chaired by Edwin Collins, president and CEO of Lockheed Georgia Employees FCU, is establishing a task force, including investments experts, to explore the issue. They plan to meet with NCUA in the coming weeks on the ANPR and framing CUNA’s response. “ CUNA thinks the flexibility of the ANPR provides credit unions with a great opportunity to influence the final regulation and give NCUA ideas on how to further improve upon it,” CUNA General Counsel Eric Richard said. [email protected]

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