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Bipartisan Bill Would Expand Federal Credit Union Investment Authority

WASHINGTON—Reps. Janelle Bynum (D-OR) and Young Kim (R-CA) introduced bipartisan legislation Thursday that would significantly broaden the investments available to federal credit unions, including giving them new authority to invest in corporate debt and asset-backed securities.

Rep. Young Kim

Young Kim

The Credit Union Investment Authority Act would amend the Federal Credit Union Act to expand federal credit unions’ investment authority.

Under the bill, federal credit unions could invest in marketable debt obligations issued by companies and other organizations that are not limited to serving credit unions. The legislation would cap a credit union’s investment in the obligations of any single issuer at 10% of its paid-in unimpaired capital and surplus. The measure would also expressly authorize investments in asset-backed securities as defined under the Securities Exchange Act of 1934.

kathleencoulombe

Kathleen Coulombe

The bill would require the NCUA board to issue implementing regulations within one year of enactment governing federal credit union purchases of asset-backed securities. Those rules would have to establish requirements covering the minimum size and aggregate sale price of an issue and the investment grade of the securities.

CU Trades Respond

“To continue operating safely and soundly while offering affordable financial products to their members, federal credit unions need laws that reflect the modern financial services landscape," stated America’ s Credit Unions Chief Advocacy Officer Kathleen Coulombe. "Antiquated laws currently limit the investment options for credit unions. America’s Credit Unions thanks representatives Janelle Bynum and Young Kim for recognizing this disparity and introducing the Credit Union Investment Authority Act. Modernizing the Federal Credit Union Act will give credit unions much needed flexibility to diversity their investments, helping them manage their balance sheets, to maintain safety and soundness, and continue providing the most affordable financial services in the country. We will continue to advocate for modernized regulatory practices and hope Congress moves quickly to pass this legislation.”

The Defense Credit Union Council said it supports a targeted and overdue modernization of the Federal Credit Union Act.

"Federal credit unions should not be forced to manage modern balance sheets under outdated statutory restrictions that unnecessarily limit responsible investment choices. This legislation would provide qualified federal credit unions with additional tools to diversify their portfolios, manage liquidity and interest-rate exposure, and strengthen their long-term financial resilience," said DCUC Chief Advocacy OfficerJason Stverak. "Importantly, this bill expands investment authority without abandoning safety and soundness. It would authorize federal credit unions to invest in marketable corporate debt while limiting exposure to the obligations of any single issuer to 10% of the credit union’s paid-in unimpaired capital and surplus.

Stverak_medium

Jason Stverak

"It would also permit investment in asset-backed securities and require the National Credit Union Administration to establish prudent standards addressing issue size, aggregate sale price, and investment quality within one year. These are meaningful guardrails that pair greater flexibility with appropriate regulatory oversight," continued Stverak. 

For defense credit unions, strong and well-managed investment portfolios support the continued delivery of affordable, reliable financial services to servicemembers, veterans, military families, and the communities they serve, Stverak said.

"Giving credit unions responsible portfolio-management options can help them remain resilient through changing interest-rate environments and periods of economic uncertainty," Stverak said. "DCUC has consistently advocated for a regulatory framework that is proportionate to risk, reflects current financial and operational realities, and preserves credit-union flexibility while protecting the safety and soundness of the system. The Credit Union Investment Authority Act advances those principles.”

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