FHLBs ask NCUA to Name Them As an Emergency Liquidity Provider
In its proposal, the NCUA said credit unions can ensure access to backup liquidity by:
- Becoming a member of the Central Liquidity Facility (CLF);
- Becoming a CLF member through a CLF agent; or
- Establishing direct borrowing access to the Federal Reserve's Discount Window.
CUNA noted in a comment letter to the agency that a major issue of concern for a number of credit unions is the exclusion of the Federal Home Loan Banks as a permissible source of emergency liquidity.
In their Jan. 31 letter to NCUA Chairman Debbie Matz and board member Michael Fryzel, the FHLB presidents wrote, "The FHLBanks serve as a reliable source of liquidity for all of their members during all economic cycles, and we urge the NCUA to include the FHLBanks among the eligible sources of emergency liquidity.
"Such action would encourage and facilitate a stable source of funding to assist credit unions of all sizes in meeting their business, community, and member needs." The letter was a follow up to earlier comments to the agency on the issue.
The FHLB presidents wrote that they appreciate that the NCUA recognized in its notice of proposed rulemaking the importance of the FHLBanks in providing liquidity and other services to credit unions.
"We also agree with your recommendation that credit unions of all sizes should consider the merits of membership in their local FHLBank, but we believe that the FHLBanks are and should be included as a reliable source of emergency liquidity."
The FHLBs were created by Congress in 1932 f to provide liquidity support to the nation's mortgage lenders. Credit unions and other financial institutions can access the FHLB liquidity system by becoming FHLB members.