An opportunity for federally chartered credit unions to gain greater flexibility in managing interest rate risk and making profitable decisions.
Key Takeaways
- The preapproval process for derivative use will be eliminated for Federal Credit Unions with greater than $500 million in assets and a Management Component CAMEL rating of 1 or 2.
- Removal of references to specific product types that are permissible and characteristics in §703.102.
- Removal of both entry limits and standard limits authority pertaining to fair value loss and WARMN limits.
On October 15, 2020 the NCUA Board of Directors unanimously approved a proposed rule that would ease regulations on derivative use, open the scope of permissible derivatives, and make it easier for Federal Credit Unions to hedge their balance sheet interest rate risk using derivatives. Institutions that already have derivative approval would be subject to the terms and conditions of the final ruling. The proposed rule will be open for comment for 60 days following its publication in the Federal Register. ALM First applauds the NCUA staff and Board for proposing more principles-based regulations on derivatives and our comments will reflect this support.