WASHINGTON—The Treasury Department has released a report detailing ways to streamline and reform the regulatory system for capital markets.
While the report heavily focuses on improvements for the Securities and Exchange Commission and Commodity Futures Trading Commission regulations, it does touch on recommendations for securitized products, which could impact credit unions, noted NAFCU in its analysis.
“This is the second report released under direction of President Donald Trump's executive order, Core Principles for Regulating the United States Financial System. The first report was specific to credit unions and banks and included several NAFCU-requested recommendations aimed at helping the industry better serve its members and communities. NAFCU was the only credit union trade association directly cited in the report,” the trade association stated.
According to NAFCU, the Treasury suggestions in this recently released report that could be applicable to credit unions include:
- Recommending that banking regulators rationalize the capital required for securitized products with the capital required to hold the same disaggregated underlying assets
- Recommending that bank capital requirements for securitization exposures sufficiently account for the magnitude of the credit risk sold or transferred in determining required capital instead of tying capital to the amount of the trust consolidated for accounting purposes
- Recommending that banking regulators expand qualifying underwriting exemptions across eligible asset-classes through notice-and-comment rulemaking
“While these recommendations do not apply to the NCUA specifically, NAFCU will encourage the agency to review these suggestions as it drafts its upcoming guidance on asset securitization. Last month, NAFCU-member credit unions and association and NCUA staff met to discuss the progress on the agency's guidance and to go over various credit union questions and concerns on the topic,” NAFCU said.
As CUToday.info reported, the NCUA board announced during its June open meeting that it had determined a federal credit union already has the authority to issue securities as part of its incidental powers under the Federal Credit Union Act. At that time, the agency issued a legal opinion letter on federal credit unions' authority to issue and sell securities and said it would create guidance on the topic in the coming months.