NCUA Listens to NASCUS and State Regulators in Limiting Final Derivatives Rule to Federal Credit Unions
January 23, 2014 - Arlington, Va. - Today, the National Credit Union Administration (NCUA) announced that the agency had approved a final rule granting federal credit unions limited derivatives transaction authority. Notably, the final rule addresses only federal credit unions, deferring to state authority for federally-insured state-chartered credit unions. This represents a significant and welcome change from the rule as proposed—a change NASCUS has worked hard to achieve since the rule was published for comment last year.
The rule as proposed provided some federal credit unions with the authority to issue simple swaps and caps. It would also have preempted state authority, limiting state-chartered federally-insured credit unions to exercising only that authority granted to federal credit unions. As noted by NASCUS in lengthy comments filed with NCUA, many states had experience supervising derivatives transactions in state-chartered depository institutions. In addition, NASCUS noted other difficulties with the proposed rule as it related to state credit unions. Several state regulators filed their own comments in support of NASCUS' letter, raising serious concerns with NCUA's proposed preemption of state law.
NASCUS and state regulators continued to dialogue with NCUA over these important issues, and several NASCUS Board members traveled to Washington late last year to talk with the NCUA Board members and senior staff in person over state concerns. NASCUS commends NCUA for working with its state peers and reconsidering its approach to effective derivatives regulation.
"In limiting the final rule to federal credit unions, NCUA acknowledges the experience, expertise, and ability of the states to supervise this activity in their state credit unions," said NASCUS President and CEO Mary Martha Fortney. "NASCUS had serious concerns with the rule as proposed, and to NCUA's credit, they engaged in candid and meaningful dialogue with NASCUS and the state regulators about our concerns and NCUA's concerns as well. That state authority has been preserved is not just a benefit to the state system; it preserves dual chartering and that benefits the entire state system."
NASCUS will continue to work with NCUA on issues related to regulating derivatives to ensure that the activity, whether conducted in state-chartered credit unions pursuant to state rules, or in federal credit unions pursuant to NCUA's rules, is managed and supervised in a safe and sound manner.