ALEXANDRIA, Va.-When does maturity start? That is what ING of New Jersey asked NCUA’s legal team recently. A federal credit union can only purchase bank notes with an original weighted average maturity of less than five years, NCUA Associate General Counsel Sheila Albin replied in a legal opinion letter. The financial services provider asked if a federal credit union could purchase a bank note with an original weighted average maturity of 10 years if the remaining maturity is less than five years. She also explained that federal credit unions can only invest in bank notes that conform to NCUA’s regulatory requirements. These do not include subordinated bank notes, described as lower ranking than senior notes by ING. In determining the permissibility of an instrument, NCUA generally defers to the definition of deposit in the Federal Reserve Board’s Regulation D. Albin quoted NCUA’s investment regulation that defines a bank note as “a direct, unconditional, and unsecured general obligation of a bank that ranks equally with all other senior, unsecured indebtedness of the bank, except deposit liabilities and other obligations that are subject to any priorities or preferences.”

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