After the avalanche of regulations that were released by the CFPB in January the credit union industry needed a respite and good regulatory news. At the Feb. 21 NCUA board meeting that news was delivered with two final rules that will positively affect credit unions.
The first positive change enacted into a final rule is the ability of federal credit unions to invest in Treasury Inflation Protected Securities (TIPS). This is especially important since we face rising interest rates and will assist credit unions management of portfolio risk in an inflationary economic environment.
TIPS are considered an extremely low risk investment that is backed by the U.S. government and designed by the U.S. Treasury Department to protect investors from the negative effects of inflation. The PAR value of a TIPS investments rises with inflation, which is determined by the Consumer Price Index, while the interest rate remains fixed. When TIPS mature, holders are paid the adjusted principal or the original principal, whichever is greater. Previously, federal credit unions could not invest in TIPS because the Consumer Price Index was generally a prohibited index for variable-rate securities.
The NCUA also finalized an amended definition of a rural district for field of membership in the NCUA’s Chartering and Field of Membership Manual. The final rule allows an area to qualify as a rural district if its population does not exceed 250,000 people or 3% of the population of the state in which the majority of the district is located. The rule further defines a rural district to also include the restriction that:
The rural district amended definition was proposed and finalized to provide additional flexibility to federal credit unions serving rural areas to provide expanded access to affordable financial services.
In January the NCUA finalized beneficial rules on the definition of a small credit union by amending the asset threshold to $50 million and extending the acceptance period for low-income status designations from 30 to 90 days. With volumes of documents credit unions are sorting through to understand the new regulatory requirements for mortgage lending and international remittance transfers it is refreshing to have a regulatory agency provide credit unions with relief and good news.