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NCUA letters address Corp. CU actions due diligence
ALEXANDRIA, Va. (10/8/10)--The National Credit Union Administration (NCUA) this week followed up its recent corporate credit union actions by releasing a series of letters to credit unions. Letters 10-CU-17, 10-CU-19, 10-CU-20 and 10-CU-21 address the recently determined National Credit Union Share Insurance Fund Premium, the NCUA’s corporate credit union resolution, the new corporate credit union rule, and the general state of the credit union industry, respectively. The NCUA also makes more specific recommendations to credit unions in letter 10-CU-18. In that letter, the NCUA recommends the risk management processes needed to ensure that credit unions have taken appropriate due diligence. The agency recommends that credit unions risk management practices include examinations of exposure limits, “accurate risk measurement, an understanding of the investment’s structure, knowledge of the collateral performance, and a determination of investment suitability. “Knowing what questions to ask and which documents to review is the foundation of a solid due diligence process,” the NCUA adds. The NCUA said that credit unions should also note the nature of the investment, whether or not it is backed by any collateral, the interest rate structure of the investment, the amount of the investment. The maturity schedule of the investment and whether or not the given investment fits within the credit union’s investment policy and asset-liability management constraints should also be determined, the NCUA said. For the full NCUA letters, use the resource link.
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