In a blunt document, the National Association of Federal CreditUnions has come out with a big no in regard to the recent NCUAAdvanced Notice of Proposed Rulemaking (ANPR) designed to forcecredit unions to get in place approved liquidity.

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NAFCU, in its comments, joins a parade of opponents of the proposed rule.

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In its written comments — signed by Dan Berger, executive vice president,government affairs — NAFCU said, “As a general matter, NAFCU doesnot support the contemplated regulatory requirement. Withouta doubt, FICUs should ensure that they have adequate sources ofliquidity they should turn to in cases of emergency. However,imposing a regulatory requirement is not the appropriateapproach.”

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Earlier in February, in an interview with NAFCU CEO Fred Beckerthat focused on liquidity, Becker had intimated his tradeassociation's opposition to the ANPR. At that time, he toldCredit Union Times, “First and foremost we are hearingabout the exclusion of the Federal Home Loan Banks – they areexcluded from liquidity. They are not an alternative. Theyshould be.”

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In its ANPR NCUA itemizes four routes to approved liquidity –two revolve around funding the Central Liquidity Facility (directlyor through a corporate), a third is demonstrated borrowing abilityat the Fed's Discount Window (which traditionally has heftycollateral requirements), and the fourth is holdings inTreasuries.

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Said Berger in the NAFCU statement, “We believe the agency hasunnecessarily restricted to four the number of sources that wouldmeet the regulatory requirement, two of which are directly tied tothe CLF thereby increasing concentration risk within theindustry.”

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Berger added, “While they are not lenders of last resort, FHLBsare a vital source of liquidity. And, the fact that a largeproportion of FICUs that hold mortgages are members of a FHLB,along with the notable increase in credit union FHLB membership inrecent years, should, without question, lend to the conclusion thatNCUA's contemplated regulation includes FHLB membership as anoption to meet the proposed requirement.”

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Becker, in the Credit Union Times interview, stressed,“Liquidity is important. But what business model does the industrywant?” In its filing NAFU has made clear it does not believethe NCUA ANPR is that model.

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