ALEXANDRIA, Va.—A federal credit union can issue and sell securities, provided it meets a three-pronged test detailed in NCUA’s regulations on items considered incidental powers.
NCUA issued this stance in a legal opinion letter, sent in response to a question about whether the Federal Credit Union Act allows a federal credit union to issue and sell securities, CUNA reported.
“Consistent with the FCUA and NCUA’s regulations, it is the opinion of NCUA’s Office of General Counsel that an FCU does have the authority to issue and sell securities as a power incidental to its operation, and, in the case of Government National Mortgage Association (Ginnie Mae) securities, as a power expressly authorized under the Federal Credit Union Act,” the letter reads.
Even though issuing and selling securities is not considered pre-approved under NCUA regulation 721.3, NCUA’s opinion is that those activities can be considered incidental powers under section 721.2, CUNA explained.
CUNA explained that, according to the letter, an activity is considered an incidental activity if it:
- Is convenient or useful in carrying out the mission or business of credit unions consistent with the Federal Credit Union Act
- Is the functional equivalent or logical outgrowth of activities that are part of the mission or business of credit unions
- Involves risks similar in nature to those already assumed as part of the business of credit unions
Federal credit unions wishing to engage in these activities will still need to follow the application procedures detail in 721.4 of the incidental powers rule, CUNA explained, adding that NCUA will issue guidance on the securitization of assets before December.