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Survey on Derivatives Proposal

NCUA is proposing to allow qualified credit unions to buy two types of what it describes as “plain vanilla” derivatives to hedge against interest rate risk (IRR). One authorized derivative would be an Interest Rate Cap contract pursuant to which a credit union would effectively pay a premium to a counterparty in return for the counterparty agreeing to compensate the credit union if interest rates reach a designated level. A second type of authorized derivative would be an Interest Rate Swap, under which a credit union and a counterparty would agree to swap the interest generated from designated assets in their respective portfolios. For your reference, the proposal can be viewed at http://www.ncua.gov/about/Documents/Agenda%20Items/AG20130516Item3b.pdf.

Note: Only federally chartered credit unions and state-chartered credit unions authorized by New York State that (1) have $250 million or more in assets; (2) have a CAMEL rating of 1, 2 or 3; and (3) have a management component of 1 or 2 would be eligible to apply for this authority.

 


If given the power to do so, would your credit union purchase derivatives as a hedge against interest rate risk? Please select one







NCUA is considering imposing application fees on interested credit unions to offset the cost of reviewing and monitoring applicants. The fees could range anywhere from $25,000 to as high as $125,000. Which of the following statements reflects your opinion on this? Please choose one.





Under the proposal, only credit unions with assets of at least $250 million would be eligible to apply for derivative authority. Do you agree with this threshold?











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