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CLF low-income CUs focus of NCUA webinar
ALEXANDRIA, Va. (8/15/12)--Issues facing the National Credit Union Administration's (NCUA) Central Liquidity Facility (CLF) and low-income credit unions (LICUs) took center stage at a Tuesday NCUA webinar.

NCUA staff in the webinar stressed that more than 6,000 natural person credit unions will lose access to the CLF, which serves as a liquidity lender to credit unions in need of emergency funding, when U.S. Central Bridge Corporate CU closes in late October. This pending lack of backup liquidity could create significant issues if systemic financial issues arise, NCUA Division of Capital Markets Director and CLF President Owen Cole said.

In anticipation of this closing, the NCUA last month released a proposed rule that would require some credit unions to establish new sources of emergency liquidity through becoming CLF members or establishing direct borrowing access to the Federal Reserve's discount window.

Applying for regular CLF membership is a "very brief" and simple process, Cole said. Along with an application, copies of a credit union's balance sheet, income/expense statement, delinquent loan report, and a check for the calculated amount of the required capital stock subscription are all that is required. State-chartered credit unions must also provide a copy of their charter and bylaws, along with the application and other materials.

Cole said corporates can help those credit unions that may need some assistance signing up for their own CLF coverage.

Collateral requirements for CLF membership are "fairly broad," and Cole said the amount of stock that a credit union subscribes for when it signs up for CLF coverage does not determine the maximum amount of financial backing they would receive from the CLF if any issues arise.

CLF access for the 93 natural person credit unions that currently hold CLF stock will not change in late October, he said.

Whether a credit union picks the CLF or the Fed's discount window as its source of emergency liquidity is an individual choice for each credit union, and Coyle said he would not dissuade credit unions from doing both.

In a second webinar session, NCUA Office of Small Credit Union Initiatives Director Bill Myers and other NCUA staff said that credit unions that are interested in receiving a LICU designation, but were not contacted by the NCUA during a recent outreach effort, may still apply.

The NCUA earlier this month contacted nearly 1,000 credit unions to inform them that they are eligible for low-income designations. That designation brings benefits that include the ability to accept supplemental capital and an exemption from the small business lending cap under certain circumstances.

Myers said that credit unions that wish to apply for a LICU designation may need to undertake deeper examinations of their membership, including verifying some address information, examining loan data, generating statistically valid samples of member data, and performing a membership survey to see if they meet LICU criteria.

The NCUA can also work with state-chartered credit unions and their state regulators to determine their LICU status. Myers noted that credit unions are not required to have community charters to qualify for LICU status.

LICU designation eligibility will be updated by the agency quarterly, and credit unions may request the exact results of the NCUA's analysis of their LICU status.

Credit unions that lose their status will be notified by the NCUA, and those that are dropped from the NCUA's list of LICUs may attempt to requalify for five years. They will also be given five years to come into compliance with any new regulations that may impact them as a result of their loss of low-income status.

An audio version of the webinar, and a transcript, will be archived on the NCUA site in the near future.
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