WASHINGTON — Reps. Janelle Bynum (D-OR) and Young Kim (R-CA) have introduced bipartisan legislation that would expand the types of investments federal credit unions can make, drawing support from America’s Credit Unions.
The Credit Union Investment Authority Act would amend the Federal Credit Union Act to give federal credit unions broader authority to invest in corporate debt and asset-backed securities. The legislation would permit investments in marketable obligations, bonds, notes and other debt instruments issued by companies and other organizations that are not primarily designed to serve credit unions.
The bill would limit a federal credit union’s investment in obligations of any single issuer to no more than 10% of its paid-in unimpaired capital and surplus.
Explicit Authorization
The legislation also would explicitly authorize federal credit unions to invest in asset-backed securities. The National Credit Union Administration would be required to issue implementing regulations within one year of enactment.
Those regulations would establish requirements governing the minimum size of an asset-backed securities issue at the time of its initial distribution, the minimum aggregate sale price and the investment grade of the securities.
America’s Credit Unions endorsed the measure, arguing that existing federal law has failed to keep pace with changes in financial markets and unnecessarily restricts credit unions’ ability to manage their balance sheets.
‘Reflects’ Modern Landscape
“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,” Kathleen Coulombe, chief advocacy officer for America’s Credit Unions, said in a statement
Coulombe said antiquated laws currently limit federal credit unions’ investment options and thanked Bynum and Kim for introducing the legislation.
“Modernizing the Federal Credit Union Act will give credit unions much needed flexibility to diversify their investments, helping them manage their balance sheets, to maintain safety and soundness, and continue providing the most affordable financial services in the country,” Coulombe said in a statement.
She added that America’s Credit Unions will continue advocating for modernized regulatory practices and urged Congress to move quickly to pass the bill.
