[Federal Register Volume 62, Number 248 (Monday, December 29, 1997)]
[Rules and Regulations]
[Pages 67549-67550]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-33750]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 62, No. 248 / Monday, December 29, 1997 /
Rules and Regulations
[[Page 67549]]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 725
Central Liquidity Facility
AGENCY: National Credit Union Administration (NCUA).
ACTION: Final rule.
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SUMMARY: The National Credit Union Central Liquidity Facility (the
Facility), a mixed-ownership government corporation within the NCUA,
serves as a liquidity source for its member credit unions. The NCUA
Board is issuing this rule to permit the Facility to take, in lieu of a
blanket security interest, a first priority security interest in
specific assets of the credit union with a net book value at least
equal to 110% of the amounts owed on the Facility advance or Agent
loan. The final rule will provide credit unions with greater
flexibility in their normal operations while ensuring that the Facility
is adequately protected for any loans that it makes.
DATES: Effective January 28, 1998.
FOR FURTHER INFORMATION CONTACT: Herbert S. Yolles, President, National
Credit Union Central Liquidity Facility, 1775 Duke Street, Alexandria,
VA 22314-3428. Telephone Number (703) 518-6391 or (703) 518-6363.
SUPPLEMENTARY INFORMATION:
A. Background
Public Law 96-630, Title XVIII, 12 U.S.C. 1795, et seq., enacted in
1979, created the Facility. Its purpose is to improve general financial
stability by meeting the liquidity needs of credit unions and thereby
encourage savings, support consumer and mortgage lending, and provide
basic financial resources to all segments of the economy.
Most credit unions are members of a corporate credit union. In
addition, credit unions are now eligible for Federal Home Loan Bank
membership. Both corporate credit unions and Federal Home Loan Banks
require that a credit union provide collateral for borrowing. In
addition, credit unions may also borrow from other financial
institutions and are required to provide collateral for such
borrowings. While multiple security agreements are not prohibited under
the current regulation, the presence of competing security interests
could result in the Facility being under-collateralized for any
advances.
B. Comments
Twenty-six comment letters were received. Of these, eleven were
received from corporate credit unions, eleven from natural person
credit unions and four from credit union associations. All twenty-six
concurred with the final rule change. One natural person credit union
commented that the requirement to provide collateral with a net book
value of at least 110 percent of the amount owed appeared to be
excessive. They recommend that NCUA establish a loan-to-value ratio of
100 percent unless an assessment of risk, i.e., as indicated by the
credit union's last examination, indicated the need for a lower loan-
to-value. The Board continues to believe that collateral with a net
book value of at least 110 percent of the amount owed is needed to
adequately protect the Facility.
Collateral--Net Book Value
Currently, Section 725.19 requires that the Facility secure each
loan with a blanket security interest in all of the assets of the
member credit union. The final rule gives the Facility the option of
taking either a blanket security interest or a first priority security
interest in specific collateral of the credit union with a net book
value at least equal to 110% of the amounts owed on the Facility
advance or Agent loan. This requirement will permit a credit union to
provide collateral to other lenders and still have the ability to
borrow from the Facility, so long as it has other assets with
sufficient net book value to support the Facility advance or Agent
loan. It also will permit the Facility to accept a security interest in
all assets of the credit union as collateral for a Facility advance to
a Regular member. However, the net book value of the assets will still
have to be at least equal to 110% of the amounts owed on the Facility
advance or Agent loan.
Superior Perfected Interest
In calculating the value of the assets covered by the security
interest, assets in which any third party has a superior perfected
interest will be excluded.
Section 208 Assistance
The final rule also expressly authorizes the Facility to accept the
guarantee of the National Credit Union Share Insurance Fund as
collateral for borrowings by a credit union. This provision facilitates
advances by the Facility to credit unions receiving assistance under
Section 208 of the Federal Credit Union Act.
Regulatory Procedures
Regulatory Flexibility Act
The NCUA Board certifies that this final rule will not have a
significant impact on a substantial number of small credit unions
(those under $1 million in assets). The final rule will make it easier
for credit unions to obtain loans from both Facility and other sources.
Accordingly, a regulatory flexibility analysis was not required.
Paperwork Reduction Act
The final rule has no information collection requirements;
therefore, no Paperwork Reduction Act analysis was required.
Executive Order 12612
The NCUA Board has determined that the final rule will not have a
substantial direct effect on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among various levels of government.
List of Subjects in 12 CFR Part 725
Credit, Credit unions, Reporting and recordkeeping requirements.
By the National Credit Union Administration Board on December
18, 1997.
Becky Baker,
Secretary of the Board.
For the reasons set forth in the preamble, NCUA amends 12 CFR part
725 as set forth below:
[[Page 67550]]
PART 725--NATIONAL CREDIT UNION ADMINISTRATION CENTRAL LIQUIDITY
FACILITY
1. The authority citation for part 725 continues to read as
follows:
Authority: Secs. 301-307 Federal Credit Union Act, 92 Stat.
3719-3722 (12 U.S.C. 1795-1795f).
2. Section 725.19 is revised to read as follows:
Sec. 725.19 Collateral requirements.
(a) Each Facility advance and each Agent loan shall be secured by a
first priority security interest in collateral of the credit union with
a net book value at least equal to 110% of all amounts due under the
applicable Facility advance or Agent loan, or by guarantee of the
National Credit Union Share Insurance Fund.
(b) The Facility may accept as collateral for each Facility advance
to a Regular member, a security interest in all assets of the Regular
member; provided however, that the value of any assets in which any
third party has a perfected security interest that is superior to the
security interest of the Facility shall be excluded for purposes of
complying with the requirements of paragraph (a) of this section.
(c) The Facility may accept as collateral for each Facility advance
to an Agent member, a security interest in the Agent loans for which
the Facility advance was made; provided however, that the collateral
for such Agent loan meets the requirements of paragraph (a) of this
section.
[FR Doc. 97-33750 Filed 12-24-97; 8:45 am]
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