With all corporate credit unions participating, Central Liquidity Facility has $13 billion more borrowing authority to year-end

The liquidity facility run by the federal credit union regulator will be able to borrow more than $13 billion to meet the liquidity needs of 3,700 credit unions through this year-end under membership subscriptions enabled under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the agency announced in a Letter to Credit Unions Monday.

The statute, enacted March 27, temporarily permits corporate credit unions to become agent members of the Central Liquidity Facilty (CLF) for a subset of their members, as explained in the letter (20-CU-14) from National Credit Union Administration (NCUA) Chairman Rodney Hood. Hood reported that all 11 corporates have joined the CLF as agent members, effective immediately. These institutions have purchased CLF capital stock for their member credit unions having assets of less than $250 million. That means, the letter states, that all credit unions with assets of less than $250 million and that are members of a corporate credit union are now eligible to apply for a loan from the CLF.

The corporates’ joining the facility extended CLF coverage to more than 3,700 credit unions and increased the CLF’s borrowing capacity by over $13 billion, the agency letter notes. (Preliminary financials for the CLF showed the facility had $7.5 billion in such authority as of this Feb. 29.)

The CARES Act increased the CLF’s borrowing authority from up to 12 times its subscribed capital stock and surplus to 16 times its subscribed capital stock and surplus. It also temporarily relaxes the requirements on agent membership so that an agent member is no longer required to buy capital stock for all of its member credit unions but may do so for a chosen subset of the credit unions it serves. Authority to serve the liquidity needs of corporates, and not just natural person credit unions and the National Credit Union Share Insurance Fund (NCUSIF), is also among the changes provided by the act.

While the agent network announced Monday will expire this Dec. 31 under the CARES Act, for now it “substantially increases contingent liquidity coverage and capacity within the credit union system,” Hood wrote.

Hood, in the letter, noted that CLF access for credit unions with less than $250 million in assets that are already direct, regular members of the CLF does not change. In addition, credit unions that have an existing relationship with a corporate credit union will not see a change in their relationship as a result of their corporate credit union becoming an agent member of the CLF.

The letter advises credit unions covered by the new CLF agent members to work directly with their corporate credit unions to seek a CLF loan; their corporates will serve as the liaison between them and the CLF for any loan requests. Covered credit unions that are members of more than one corporate are advised by the agency to contact those corporates to determine which one is serving as their liaison to the CLF. (The letter states that an attachment to the letter provides contact information for each corporate credit union.)

Hood, in the letter, encouraged credit unions that are not covered by an agent member and not a regular member of the CLF to consider the benefits of joining. The more credit unions that join and purchase stock subscriptions in the CLF, the more borrowing authority there will be for the facility.

NCUA Letter 20-CU-14

 

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