CUNA Regulatory Comment Call

December 31, 2002

NCUA's Proposed Rule on Investments and Deposit Activities

(MAJOR RULE)

EXECUTIVE SUMMARY

Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Associate General Counsel Mary Dunn at mdunn@cuna.coop and to Assistant General Counsel Jeff Bloch at jbloch@cuna.coop; or mail them to Mary and Jeff in c/o CUNA's Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, DC 20004-2601. You may also contact us at 800-356-9655, ext. 6732.

BACKGROUND

NCUA issued an ANPR on October 18, 2001 with regard to the rules on investments and deposit activities. The ANPR solicited comment on how NCUA could provide FCUs with greater flexibility and enhanced investment authorities without sacrificing safety and soundness. NCUA was also interested in comments on how the rule could be revised so that they are easier to understand. NCUA has reviewed the comments it received in response to the ANPR, as well as other issues that have arisen, and has now issued this proposal.

DESCRIPTION OF THE PROPOSED RULE

The proposal will amend NCUA's rule regarding the investment activities of FCUs, which will also include expanding the RegFlex program to conform to a number of these proposed revisions. Here are the proposed changes, along with NCUA's response to a number of comments that were submitted in response to the ANPR:

A RegFlex eligible FCU can only purchase such CMRS up to fifty percent of its net worth in the aggregate. The proposal will also allow FCUs to provide mortgage servicing as an incidental power, as long as it owns the loan. The proposal will also incorporate the investment pilot program as a means of evaluating and granting expanded investment authority to FCUs and NCUA will soon issue standards for approval of such activities in an effort to educate FCUs about the program. NCUA has determined that FCUs with foreign branches may apply to NCUA for expanded investment authority under the pilot program in order to make investments necessary to manage currency rate risk and other risks associated with conducting businesses in foreign countries.

QUESTIONS TO CONSIDER REGARDING NCUA's PROPOSED RULE ON INVESTMENT AND DEPOSIT ACTIVITIES

Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com
Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 • mdunn@cuna.com
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 • corr@cuna.com