Federal credit unions will have a greater ability to diversify their investment portfolios after the National Credit Union Administration board unanimously approved a final rule giving credit unions access to a larger pool of permissible bank note investments.
Previously, NCUA’s investments regulation allowed federal credit unions to invest in bank notes, but limited it to notes “with original weighted average maturities of less than five years.” The new rule will permit federal credit unions to purchase bank notes with original maturities of greater than five years as long as remaining maturities are less than five years.
The National Association of Federal Credit Unions supported the rule change. NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt urged the NCUA board to consider other changes to further expand investment authority for federal credit unions.
“NAFCU and our members welcome the agency’s efforts to grant credit unions greater flexibility in their investment opportunities, offering much-needed regulatory relief,” Hunt said in a news release on the NAFCU website. “However, we would fully support NCUA doing more to expand the range of investment options available to federal credit unions.”
The change will result in cheaper execution prices, more flexibility and greater efficiency in finding suitable bank note offerings, and the weighted-average maturity of less than five years also will maintain safety and soundness by avoiding excessive interest rate risk, according to the NCUA.
The final rule is effective 30 days after its publication in the Federal Register. For questions about permissible investments, credit unions may call NCUA’s Investment Hotline toll-free at 800-755-5999.