WASHINGTON—CUNA, the American Association of Credit Union Leagues (AACUL), and state leagues have written to NCUA calling on the agency to ensure that creditworthy credit unions with negative tangible equity are able to “quickly and efficiently” obtain necessary written requests for advances from NCUA to the Federal Home Loan Banks.
The Federal Housing Finance Agency currently prohibits FHLBanks from making new advances to members with negative tangible capital unless the institution’s federal agency or insurer makes a written request to the FHLBank.
“The unique effects of the pandemic on the housing market and financial institutions’ balance sheets in combination with a rising rate environment, has increased the likelihood that many financial institutions may have negative tangible capital under this definition,” the letter reads. “However, this is not truly an indicator that these financial institutions are not creditworthy. The FHLBanks already engage in a rigorous credit review process, but, unfortunately, this bright line regulatory requirement puts the onus on NCUA to verify the credit union is safe and sound before the advance can be issued.”
Request to be ‘Transparent, Efficient’
CUNA and the groups requested NCUA ensure the request process is “transparent, efficient, and as fast as possible,” and are asking that NCUA communicate about this process quickly so the requests aren’t delayed.
“If possible, NCUA should make a preemptive written request that the FHLBanks make advances to credit unions that can demonstrate their safety and soundness through reported metrics, such as their capitalization category,” the letter reads. “This would ensure that NCUA could spend time considering issuing written requests only for those credit unions that might be actual borderline cases.
“We also would encourage the NCUA to work with the FHFA to waive the regulatory requirement for the FHLBanks to treat negative tangible equity as a disqualifying metric of credit worthiness when considering new advances to members,” the letter adds.
Longer Term Request
In the longer term, the organizations said they believe FHFA should modify its requirements to align with NCUA and other regulators’ capital requirements when determining a credit union’s creditworthiness in connection with a new advance.
The Very Best in CU Reporting. Every Morning. To Your Inbox. At a Price Every CFO Will Love.
Don’t forget to check your Spam/Junk email folder if you haven’t been receiving your free, popular and daily CUToday.info news headlines.
And if you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time.
CUToday.info has received very positive response from readers following the move to an improved provider of the daily headlines, but many also noted they did need to go to their Spam/Junk folder and mark it as safe.
The new email solution has not only improved every reader’s delivery experience, but it also features a fresh, new format that is easy to read, especially on mobile devices.
Please note and/or make your IT department or email administrator aware the emails will be coming from the domains CUTodayinfo.com and CUTodayinfoReply.com.