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NCUA addresses asset reduction via Feds EBA program
ALEXANDRIA, Va. (7/28/11)—The National Credit Union Administration (NCUA) sent a letter to federally insured credit unions (11-CU-10), intended to educate those unions who are members of corporate credit unions, on the Federal Reserve Bank Excess Balance Account (“EBA”) Program. The NCUA letter said that as the corporates share their business plans with their member credit unions, many of these plans note a “considerable reduction in asset size (that) will dictate lower amounts of contributed capital from member credit unions” to meet regulatory capital requirements. One tool some CCUs are considering as a means to reduce asset size, the letter said, is the Fed’s EBA plan, and the letter included a fact sheet on the program. The NCUA explained that in 2009 the Fed established limited-purpose accounts at Federal Reserve Banks (FRBs) for the purpose of maintaining excess reserve balances. The EBAs are intended to allow eligible institutions, which includes member consumer credit unions, to earn interest on their excess balances in an account relationship directly with a FRB without significantly disrupting established business relationships with their correspondents credit unions. The NCUA letter also provides information on:
* How EBAs work; and * Due diligence requirements.
Use the resource link to access the NCUA letter.
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