Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

News Now

Washington
Compliance: CUNA Clarifies Credit Rating Question
WASHINGTON (3/27/13)--Are credit unions still allowed to rely on credit ratings as they determine the acceptability of a given investment? Yes, Credit Union National Association Senior Vice President for Compliance Kathy Thompson said in a new CUNA CompBlog question and answer post.

In the post, Thompson clarified that credit unions are permitted to use credit ratings as one of many ways to determine the "investment grade" of a security.

As of June 11, the National Credit Union Administration will substitute "investment grade" wherever a specific credit rating appears in Section 703 of its regulations.

"This means that the credit union is required to analyze and be comfortable in concluding that the risk of default by the issuer is low and timely repayment of principal and interest is expected. The regulations suggest a list of eight factors a credit union may consider in its analysis. Although NCUA can't rely on a credit rating, there is nothing that prohibits a credit union from using credit ratings in its analysis," Thompson wrote.

The NCUA's Section 703 regulation on investments only applies to federal credit unions, Thompson noted. However, she added, if a federally insured state chartered credit union holds an investment not permissible for a federal credit union, it may be subject to special reserving on that investment.

"In Section 741.3, the NCUA points out that if a federally insured state chartered credit union relies upon a ratings-based investment permissible under state law, that credit union should go through the same 'investment grade' analysis that a federal credit union is now required to do," Thompson explained.

For more CUNA CompBlog compliance gems, use the resource link.
Other Resources

CUNA CompBlog
RSS print
News Now LiveWire
Of $1.3B in payments through mobile devices, 90% occurred at @Starbucks stores http://t.co/MN49JR1NXK
10 hours ago
.@LoveBethpage 1st to launch mobile debit/credit card control from @COOPFS http://t.co/kuq7onGuai
11 hours ago
A booming W Okla county gets its first #creditunion @TheHEFCU See #NewsNow http://t.co/svTyMnms0X
14 hours ago
Mortgage interest rates continue slide in September @FHFA http://t.co/agU9RJW5Kq
16 hours ago
Reimagined branches shift to member, not #creditunion, needs: @cunacouncils white paper http://t.co/lN2mu0IVar
17 hours ago