February 19, 2010                                                          

                                                                                        

 

 

Southwest Corporate Launches

Site to Assist in Comments

 

 

 

Dallas--Southwest Corporate has launched a resource site on its website (www.swcorp.org) to assist and encourage interested credit unions to write comment letters regarding the National Credit Union Administration’s (NCUA) Proposed Rule for Corporate Credit Unions (Reg. 704).

 

The site contains links to NCUA’s Proposed Rule, a copy of Southwest Corporate’s extensive comment letter, an executive summary version of the comment letter as well as general tips to aid credit unions that plan to offer their own comments. NCUA’s deadline for comments is March 9^th.

 

In a letter to member credit unions this week, Southwest Corporate’s CEO John Cassidy urged interested credit unions to write comment letters--asking NCUA to revise sections of its proposed Rule for Corporate Credit Unions (Reg. 704). “Southwest Corporate believes its ability to continue to serve its member credit unions will be severely curtailed unless certain provisions of the proposal are modified,” Cassidy said.

 

Southwest Corporate provided its own comment letter to NCUA on February 17th. In its comment letter, Southwest Corporate identified fourteen issues that needed attention—two issues were identified as “critical.”  

Among the critical issues is NCUA’s proposed cash flow mismatch limitations. Under the proposal, cash flows of a corporate credit union's assets and liabilities would be so closely matched “that corporates would be unable to generate sufficient earnings, and the sustainability of any future corporate business model would be questionable,” Cassidy said. “Unless this rule is modified, Southwest Corporate will not be able to comply with the retained earnings requirements that are also included in the proposal.”

 

The other critical issue concerns the transition period for corporates to meet the Proposed Rule’s minimum risk-based capital requirements. The Proposed Rule sets the effective date for two new risk-based capital requirements at one year following publication of Part 704 in final form. Southwest Corporate is recommending that the transition period be set at: one year after the effective date of the publication of the revised Part 704 in its final form or one year after the implementation of a legacy asset solution—whichever comes later. “Such a transition period would provide all credit union industry participants with sufficient time to communicate, to implement a recapitalization plan, and to revise their respective business models,” Cassidy noted.

 

For more information about Southwest Corporate’s comment letter, please visit www.swcorp.org.

 

In the coming weeks and months, Southwest Corporate is also developing additional web-based resources that will enable credit union leaders to explain to their members the background of corporate credit unions and the role they play in the cooperative credit union structure.