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ALEXANDRIA, Va.-NCUA Chairman Dennis Dollar and Board Member Deborah Matz responded quite differently to criticism of the agency’s new corporate credit union regulation, which was aimed at creating parity for corporates and other financial institutions. Treasury’s Acting Assistant Deputy Secretary for Financial Institutions J. Patrick Cave had written a letter to the board members, after the close of the official comment period, stating that some of the provisions of the rule in combination could “lead to a weakening of safety and soundness.” The rule passed 2-1 over Matz’ objection. Dollar noted that the rule had been worked on for about three years and that four comment periods had occurred during that time, allowing for a vast opportunity for public comment and agency consideration of the provisions. “Our evaluation after this lengthy process does not agree with any assertion that the changes could lead to a weakening in the safety and soundness position of America’s corporate credit unions,” Dollar wrote. “To the contrary, I believe the final rule adopted by the NCUA Board allows corporate credit unions to continue to provide the services natural person credit unions have grown to depend upon while also providing a regulatory framework that ensures the level of risk in each corporate credit union is commensurate with the ability of the institution to manage that risk.” Matz on the other hand wrote, “Your letter validated my concerns about the safety and soundness issues raised by the proposed rule. In particular, I have been concerned with the general investment limit that would permit corporate credit unions to invest up to 50% of total capital with any single obligor.” She also voiced concern over permitting corporates to invest in securities down to BBB and allowing them to invest up to 25% in each obligation. “Given the current economic environment, I believe your comments reflected an appropriate level of caution,” Matz commended. During the October board meeting when the corporate credit union rule was passed, Dollar pointed out that numerous commenters, including Cave’s letter, wanted to apply requirements that are inappropriate for credit unions, like credit risk weighted capital. Dollar cited Treasury’s own 1997 study of corporates, to defend his point. “This final rule is based firmly on the foundation of safety and soundness, even as it acknowledges the realities of the competitive and dynamic financial marketplace in which corporate credit unions operate today,” Dollar reiterated. [email protected]

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