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Derivatives plan could be out 'soon,' Matz says
ALEXANDRIA, Va. (2/6/13)--National Credit Union Administration staffers continue to examine credit union derivatives issues, and a proposed rule on derivatives could be released in the first half of 2013, NCUA Chairman Debbie Matz said in a Tuesday webinar with Consumer Financial Protection Bureau Director Richard Cordray.

Matz noted that the agency is considering allowing well-run credit unions with the necessary expertise to use simple derivatives to hedge against interest rate risk (IRR). She said managing interest rate risk is a key concern for the agency and the proposal would be issued "soon."

The agency will also address clarity in member business lending waivers, she said. An agency letter that addresses blanket waivers, guarantees and when a waiver is required for a structured or balloon loans is in the works. The NCUA will also release credit ratings and troubled debt restructuring guidance, Matz added. Guidance that clarifies the agency's expectations for enterprise risk management practices will also be released by mid-2013, NCUA Director of Examinations and Insurance Larry Fazio said.

Cordray also previewed some of his agency's future plans during the webinar. A final version of proposed remittance transfer regulations will be released in February or March, and will become effective 90 days after it is released, he said. The CFPB has provided a safe harbor exemption from the rule for remittance providers that transact 100 or fewer remittances per year, and the final exemption threshold will remain at this level, he added.

The CFPB director said his agency is also considering giving credit unions that hold $2 billion or less in assets, and make more than 500 mortgage loans per year, safe harbor from portions of qualified mortgage/ability-to-repay regulations.

Rules addressing prepaid cards will also be released this year, but how far reaching those will be is still under consideration by the bureau, Cordray said. The CFPB is also developing plain language guides to aid smaller institutions with compliance with the new mortgage final rules. "The CFPB has reached out to CUNA for our input as they work to develop these and other resources for credit unions and we expect more details to be unveiled in the coming weeks," Credit Union National Association Senior Assistant General Counsel Jared Ihrig said.

Matz also discussed the state of the credit union system during the webinar. The credit union system's overall health is "very encouraging" with a solid average capital level of 10%, and declining delinquencies and chargeoffs, she said.

However, Matz added that some of the smallest credit unions, those with $10 million or less in assets, are struggling with a return-on-assets of zero, which in fact is an improvement over recent negative numbers. She said the pressures on these smallest credit unions are spurring a number of mergers.

"The NCUA is concerned about the health and survival of some small credit unions," Matz told the webinar audience. She added that the agency has come up with a number of plans and tools to support their operations, such as:

  • Reducing the number of examinations hours to around 40;
  • Providing more services through the agency's Office of Small Credit Union Inititiatives, such as consulting and helping with net worth restructuring plans; and
  • Increasing the use and availability of web tutorials.
She also noted the recent significant change, advocated by CUNA, that increased the threshold that defines a small credit union to $50 million in assets, up from $10 million.

The NCUA will post an archived version of the webinar in the next two weeks.


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