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
Va. #creditunion league breaks ground on new HQ #NewsNow http://t.co/Cn24i1hOHV
38 seconds ago
NJ Lt Gov Kim Guadagno shares her #creditunion story at @NJCUL convention #NewsNow http://t.co/2B7QiuUK9p
26 minutes ago
#NewsNow: 2013 mortgage data shows 14.8 mil applications, 2.8 mil purchases and more. http://t.co/DId2VFrsEr
1 hours ago
The story of @allegiancecu's Florence Rogers is captured in expanded OklaCity bombing memorial via @WSJLife http://t.co/CmF0xfPcJ4
1 hours ago
.@VACUL breaks ground for new HQ in Richmond #NewsNow http://t.co/cOC0rqqJ9o
2 hours ago