ALEXANDRIA, Va. — Well-capitalized CAMEL 1 and 2 federal credit unions will have stricter rules on fixed assets, stress testing and member business loans, as a result of the NCUA Board's decision today to change regulatory flexibility in several areas.
On a 2 to 1 vote, the board voted to eliminate the exemption from the rule banning FCUs from investing more than 5% of their shared and retained earnings in fixed assets; eliminate the exemption from the rule requiring FCUs to obtain the liability and guarantee of the borrower's principals when making a member business loan; eliminate the exemption from the rule requiring stress tests to determine the impact of a 3% increase or decrease in interest rates; and eliminate the exemption from the existing rule which limits the delegation of discretionary control to third parties over the purchase and sale of investments of up to 100% of net capital.
There are 3,142 FCUs eligible for the program with investments totaling $125 billion.
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The Board unanimously approved an interim final rule changing the definition of "low-risk assets" to extend 0% risk weighting to debt instruments backed by the NCUA.
This will allow credit unions to purchase some of the mortgage-backed securities from the conserved corporate credit unions that the agency is trying to sell.
NCUA CFO Mary Ann Woodson told the board that the NCUSIF made $6.2 million in September but has lost $563.7 million this year. The agency had projected a $54.7 million loss for September and a $491.4 million loss for the first nine months of 2010.
Because of the growing number of troubled credit unions, the agency's insurance loss expense has been $643.1 million this year, compared with a $562.5 million projection.
The fund's equity ratio remained unchanged at 1.18% at the end of September.
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