A House subcommittee has recommended that the Central Liquidity Facility borrowing authority be set at $40 billion and not subject to a cap.
The House Appropriations Subcommittee on Financial Services recommended the action to the full committee as part of the process by which Congress establishes funding for the government. Once the full committee takes action, the House will consider it, and then it will go to the Senate.
NCUA Chairman Michael E. Fryzel said the action "suggests that Congress will continue to support NCUA's authority regarding Central Liquidity Facility borrowing. I am optimistic that the cap will be removed for the second consecutive fiscal year and that Congress will provide NCUA with the necessary tools to maintain liquidity in the credit union system."
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Last year, Congress lifted the cap on the CLF's borrowing capabilities. It had been capped at $1.5 billion (as it has been since 2001), and the change granted a higher limit of $41.5 billion for the current fiscal year, which runs through September. If Congress approves the subcommittee's recommendation, the CLF borrowing authority would be about $40 billion. The borrowing authority is based on a formula of 12 times the subscribed capital stock and surplus of the CLF.
NAFCU President/CEO Fred Becker wrote the panel that the continued removal of the cap "will instill an important measure of confidence in the credit union industry. The CLF has been an effective tool in the past in providing crucial liquidity in emergency situations and has helped to maintain a comparatively unrivaled stability and confidence in the credit union system."
The subcommittee also approved a $1 million appropriation for the NCUA's Community Development Revolving Loan Fund.
Congress created the Central Liquidity Facility in 1998. Membership is voluntary, and credit unions that join purchase stock in the facility.
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