Northwest Credit Union Leaders Meet with NCUA Chairman Rodney Hood to Discuss Leveraging Central Liquidity Facility

4/21/2020

Last week, Northwest Credit Union leaders heard from National Credit Union Administration Chairman, Rodney Hood, who discussed improvements to the Central Liquidity Facility. During a virtual meeting, he urged credit unions to consider becoming members, which woulincrease liquidity overall to the credit union system and ensure they have access to an additional contingent federal liquidity source, should there be a need due to conditions stemming from the COVID-19 pandemic.  

“Our economy is facing disruptions. We do not know what the fallout might be, but we need to safeguard our members,” Hood told credit union leaders during the meeting on April 16.  

The CLF, Hood added, is meant to augment and supplement borrowings during an economic crisis. By contributing to it now, credit unions are being proactive and ready for what comes next. 

The CLF is a mixed-ownership government corporation created to improve general financial stability by serving as a liquidity lender for credit unions experiencing unusual or unexpected liquidity shortfalls. Member credit unions own the Central Liquidity Facility, which exists within the NCUA. The president of the Central Liquidity Facility manages the facility under the oversight of the NCUA Board. 

Joining now has its benefits — the six-month waiting period for a new member to receive a loan has been waived, the explicit waiting period for a credit union to terminate its membership has been eliminatedand collateral requirements for certain assets securing loans have been eased.  

Corporate credit unions have agreed to join the CLF on behalf of their members that are below $250 million in assets. Credit unions over $250 million in assets interested in joining the CLF can follow the simple steps outlined in this process document.

The CARES Act brought important changes to the CLF, including increasing the borrowing capacity of the facility, allowing corporate credit unions to join on behalf of a subset of their members and on their own behalf. It also created greater flexibility to borrow. These provisions are set to expire on Dec. 31, 2020. 

NCUA’s Board of Directors took several actions on April 16, including addressing the CLF. The Board approved an interim final rule to make additional enhancements to the fund, adding more flexibility and relief for credit unions. The changes make it easier for credit unions to join the CLF and access liquidity if the need arises, in response to the COVID-19 crisis. NWCUA’s Regulatory Team has summarized the changes, which may be found here.  

Credit unions over $250 million in assets are required by rule to have established access to the Federal Reserve’s Discount Window and/or the NCUA’s Central Liquidity Facility. If credit unions are already a Federal Reserve member, the CLF provides a second option, should they need to access capital quickly.  

Cooperation among cooperatives is what makes the Credit Union Movement strong,” said VP of Regulatory Advocacy, John Trull. “The cost to invest is low and the long-term commitment has been waived. And, participation is good citizenshipThe CLF will help credit unions serve their members should traditional liquidity markets stall.  

CLF membership is voluntary and open to all credit unions that purchase a prescribed amount of stock. Two membership types are available: regular members and agent members. Credit unions may borrow from the CLF if they are a regular member, or are covered by an agent member — a corporate credit union.  

Please contact VP, Regulatory Advocacy, John Trull with questions.  

Posted in Public Awareness.