WASHINGTON (3/10/14)--Compliance preparations for the National Credit Union Administration's new emergency liquidity rule must be complete by March 31, the Credit Union National Association reminds credit unions.
The liquidity rule sets up three-tiered emergency liquidity requirements for credit unions with less than $50 million in assets, between $50 million and $250 million in assets, and more than $250 million in assets.
The final rule contains asset-cap increases that were advocated by CUNA and will impact approximately 374 credit unions.
Federally insured credit unions (FICUs) with less than $50 million in assets must maintain a basic written emergency liquidity policy but will not be required to take further action. All FICUs with assets of $50 million or more are required to develop contingency funding plans describing how their credit union will address liquidity shortfalls in emergency situations. FICUs with assets of $250 million or more would be required to have access to a backup federal liquidity source for emergency situations.
The NCUA has said the rule is part of a global regulatory effort to promote sound liquidity-risk management. The rule will strengthen individual credit unions and, as a result, the entire system, the agency added.
The final rule does not include the Federal Home Loan Banks (FHLB) as an acceptable source of emergency liquidity, although eligible credit unions required to meet the federal source provisions would be free to borrow from a FHLB for nonemergency purposes. Without the FHLB, credit unions have two options to ensure a federal liquidity source for emergency situations: Becoming a member of the NCUA's Central Liquidity Facility (CLF) by subscribing to CLF stock or access to the Federal Reserve's discount window.
CUNA strongly supports the use of the home loan banks for liquidity.