Why You Should Read NCUA’s Latest Opinion

July 13, 2017 at 10:03 am Leave a comment

Even though most credit unions do not plan on securitizing loans anytime soon, you should read  NCUA’s recently published opinion  permitting federally chartered credit unions to issue and sell  securities.  NCUA took the opportunity to write a thoughtful analysis explaining  the scope of the agency’s incidental powers.  It provides a primer for those of you looking to request authority to engage in activities not explicitly authorized by the Federal Credit Union Act. While the opinion letter only applies to federal charters, NY state charters have a mechanism to request that they be given the same authority from DFS.

What are incidental powers? Incidental powers are powers that are: convenient or useful in carrying out the mission or business of credit unions consistent with the Act; that are the functional equivalent or logical outgrowth of activities that are part of the mission or business of credit unions and that involve risks similar in nature to those already assumed as part of the business of credit unions. Unless they are on a list of pre approved powers, NCUA typically grants incidental powers at the request of credit unions seeking a legal opinion.

An FCU wanted to know whether or not it has the authority to issue and sell securities issued by Government National Mortgage Association.  Not only do federal credit unions have the  explicit authority to issue and sell these bonds, the NCUA explained that they also had the incidental authority to issue and sell other securities. The exercise of this power is still subject to the case-by-case approval of the NCUA.

With the caveat that I may not be the most exciting guy in the world, here is what I find so interesting. NCUA used the seven page  letter to explain  just how expansive its incidental powers are.   For example, it explained that:

“In the course of expanding the powers of FCUs, Congress has repeatedly taken the opportunity to encourage NCUA to be flexible, innovative, and responsive in meeting the needs of FCUs and their members. When Congress created NCUA in 1970, the same year that share insurance was introduced, it recognized that ‘credit unions have become such a significant component of our society that they need and deserve a more responsive and independent regulatory agency.’21 Further, Congress envisioned that NCUA would have ‘a great responsibility and an opportunity to make real and substantial contributions to our society,’ and ‘would be able to be more responsive to the needs of credit unions and to provide more flexible and innovative regulation.’”

A hallmark of J. Mark McWatters tenure on the NCUA board has been a willingness to take a fresh look at some old statutes and outdated regulations. More often than not,  the result has been that credit unions have more power than previously recognized to offer products and services to members.  This approach also ensures that the will of Congress, and not regulators, determines what credit unions can and can’t do. How refreshing.

 

 

 

 

 

Entry filed under: Legal Watch, Regulatory. Tags: .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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