Monthly Meeting Recap: Derivatives, Fund NOL, and SIF Report

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On Thursday, the National Credit Union Administration (NCUA) Board approved a final rule for derivatives, approved a request for comment on the policy for setting the National Credit Union Share Insurance Fund (NCUSIF) normal operating level, and was briefed on the share insurance fund quarterly report.

Final Rule: Derivatives (Parts 701, 703, 741, and 746)
This final rule will modernize the NCUA’s derivatives rule and make it more principles-based, while retaining key safety and soundness components. The changes will provide more flexibility for federal credit unions (FCUs) to manage Interest Rate Risk (IRR) through the use of derivatives.

Request for Comment: Share Insurance Fund Normal Operating Level (NOL) Policy
The NCUA Board is inviting a request to comment on the policy and approach for setting the National Credit Union Share Insurance Fund (NCUSIF) normal operating level. The request for comment includes a number of questions pertaining to how the NOL is modeled.

The current policy establishes the following objectives that the board will seek to satisfy when setting the NOL:

  • Retain public confidence in federal share insurance.
  • Prevent impairment of the 1 percent contributed capital deposit.
  • Ensure the fund can withstand a moderate recession without the equity ratio declining below 1.2 percent over a five-year period.

Board Briefing: Share Insurance Fund Quarterly Report
The NCUA Board was briefed on the NCUSIF.  The equity ratio of the fund stands at 1.26 percent The projected equity ratio for June 30 is 1.22 percent.

While this is below the normal operating level (NOL) of 1.38 percent, it is above the 1.2 percent threshold that would require the board to institute a formal fund restoration plan.

According to staff, the June 30 actual equity ratio will be available within the next few months.

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