NAFCU Compliance Blog

Permissible Investments for Federal Credit Unions

Posted by Steve Van Beek

Last Thursday, NCUA issued Letter to Federal Credit Unions 09-FCU-01 which details federal credit unions (FCUs) ability to invest in unsecured debt obligations guaranteed under the Temporary Corporate Credit Union Liquidity Guarantee Program (TCCULGP) and senior unsecured debt guaranteed under the FDIC Temporary Liquidity Guarantee Program (TLGP).  The letter indicates FCUs are allowed to invest if certain conditions are met.

The letter provides a brief overview and background of the programs and when FCUs can invest in those programs.  The letter emphasizes that FCUs should confirm the obligations are guaranteed through maturity in order for them to be permissible purposes.

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In case you were wondering, this Letter only applies to federal credit unions.  NCUA, as it did in this case, sometimes analyzes issues solely from the FCU perspective as they are the primary regulator of FCUs.  Whether these investments are permissible for state-chartered credit unions will depend on other factors determined by its state laws and primary regulator. 

A Little of This, A Little of That; Foot-in-Mouth Disease

Here are a few compliance odds and ends:

• FinCEN reminds us again that users of magnetic filing must transition to E-filing by the end of the year.
• Banks continue to get flood-related civil money penalties.  This Bankers Online page details all the fines.
• NCUA issued Legal Opinion Letter 08-0917 regarding the safekeeping of investments. The letter indicates that a wholly-owned subsidiary of a registered bank holding company is eligiblee to act as an investment safekeeper for a federal credit union (FCU).  You may want to pass this along to whomever is in charge of your investments.

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I put my foot in my mouth more than an NFL wide receiver.  Case in point...

The other day, I wandered over to our caffeine station for a late afternoon cup of coffee.  These are always hazardous treks, since more often than not, the coffee available at such an hour is stale and cool to the touch.  Imagine my joy as I see a coworker brewing a fresh pot of coffee.

Imagine my horror as the following words tumble out of my mouth in a volume far too loud for the circumstances:

Compliance Guy: "Thanks for the fresh pot!"

Can a Credit Union Borrow Money to Purchase Investments?; HSA Index Amounts

According to NCUA, the answer is yes, subject to the general rules and limits that apply to borrowing and investing.  Go here to read  NCUA Legal Opinion Letter 08-0139 (April 18, 2008) for all the details.

Under the FCU Act, FCUs have the express power to borrow from any source, limited to 50% of paid-in and unimpaired capital and surplus. 12 U.S.C. §1757(9). The National Credit Union Administration’s (NCUA’s) regulation on maximum borrowing authority implements this provision at 12 C.F.R. §741.2. The statute and the regulation do not restrict how an FCU can use borrowed funds.

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The IRS has issued new Health Savings Account index amounts for 2009.  Read all about it here.

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We have more entries for the flower garden flower contest.  Check out the photos here. (Don't forget to send in your entry!)

Have a great weekend, everyone!

Investment Guidance?

NCUA recently issued its February 2008 newsletter.  The newsletter contains what appears to be guidance for credit unions in the area of investments.  Access the newsletter here. The article indicates that credit unions "should closely monitor" changes in the fair value of privately-issued investments for signs of credit deterioration.

Granted, an NCUA newsletter isn't quite a Risk Alert or Letter to Credit Unions.  But I doubt that NCUA wrote the "column" just for fun.  I bet they expect us all to read it.  Therefore, I'd print it out and pass it along to whomever is in charge of investments for your credit union.

NCUA issues Legal Opinion Letter Regarding FCUs Receiving Stock in Visa, Inc.

Yesterday, NCUA issued Legal Opinion Letter 07-1022, which indicates that federal credit unions (FCUs) may receive and retain Visa stock as a result of Visa's restructuring.  (As of this morning, the letter is not available on NCUA's website.) NAFCU members can access a copy of the letter here.  (Member log-in needed.)  You can read a NAFCU today article that provides a very good overview of the letter here.  State-chartered credit unions should check with their state regulator on this issue.