A corporate credit union may obtain all or part of the expanded authorities contained in this appendix if it meets the applicable requirements of part 704 and appendix B, fulfills additional management, infrastructure, and asset and liability requirements, and receives NCUA's written approval. Additional guidance is set forth in the NCUA publication Guidelines for Submission of Requests for Expanded Authority.

A corporate credit union seeking expanded authorities must submit to NCUA a self-assessment plan supporting its request. A corporate credit union may adopt expanded authorities when NCUA has provided final approval. If NCUA denies a request for expanded authorities, it will advise the corporate credit union of the reason(s) for the denial and what it must do to resubmit its request. NCUA may revoke these expanded authorities at any time if an analysis indicates a significant deficiency. NCUA will notify the corporate credit union in writing of the identified deficiency. A corporate credit union may request, in writing, reinstatement of the revoked authorities by providing a self-assessment plan detailing how it has corrected the deficiency.

A state chartered corporate credit union may not exercise any expanded authority that exceeds the powers and authorities provided for under its state laws. Accordingly, requests by state chartered corporate credit unions for expansions under this part must be approved by the state regulator before being submitted to NCUA.

Minimum Requirement

In order to participate in any of the authorities set forth in Base-Plus, Part I, Part II, Part III, or Part IV of this Appendix, a corporate credit union must evaluate monthly, including once on the last day of the month, the changes in NEV, NEV ratio, NII, WAL, and duration as required by paragraphs (d)(1)(i), (e), (f), (g), and (i) of § 704.8.

Base-Plus

A corporate credit union that has met the requirements for this Base-plus authority may, in performing the rate stress tests set forth in 704.8(d)(1)(i), allow its NEV to decline as much as 20 percent.

Part I

1. (a) A corporate credit union that has met all the requirements established by NCUA for this Part I, including a minimum leverage ratio of at least six percent, may:

   1. (1) Purchase an investment after conducting and documenting an analysis that reasonably concludes the investment is at least investment grade;
   2. (2) Engage in short sales of permissible investments to reduce interest rate risk;
   3. (3) Purchase principal only (PO) stripped mortgage-backed securities to reduce interest rate risk; and
   4. (4) Enter into a dollar roll transaction.

2. (b) In performing the rate stress tests set forth in § 704.8(d), the NEV of a corporate credit union that has met the requirements of this Part I may decline as much as:

   1. (1) 20 percent;
   2. (2) 28 percent if the corporate credit union has a seven percent minimum leverage ratio and a two and a half percent retained earnings ratio, and is specifically approved by the NCUA; or
   3. (3) 35 percent if the corporate credit union has an eight percent minimum leverage ratio and a three percent retained earnings ratio and is specifically approved by the NCUA.
3. (c) The maximum aggregate amount in unsecured loans and lines of credit to any one member credit union, excluding pass-through and guaranteed loans from the CLF and the NCUSIF, must not exceed 100 percent of the corporate credit union's total capital. The board of directors must establish the limit, as a percent of the corporate credit union's total capital plus pledged shares, for secured loans and lines of credit.

4. (d) The aggregate total of investments purchased under the authority of Part I (a)(1) and Part I (a)(2) may not exceed the lower of 500 percent of the corporate credit union's total capital or 25 percent of assets.

   Part II

5. (a) A corporate credit union that has met the requirements of Part I of this Appendix and the additional requirements established by NCUA for Part II may invest in:

   1. (1) Debt obligations of a foreign country;
   2. (2) Deposits and debt obligations of foreign banks or obligations guaranteed by these banks;
   3. (3) Marketable debt obligations of foreign corporations. This authority does not apply to debt obligations that are convertible into the stock of the corporation; and
   4. (4) Foreign issued asset-backed securities.

6. (b) All foreign investments are subject to the following requirements:

   1. (1) Investments must be made pursuant to an explicit policy established by the corporate credit union's board of directors. Before purchasing an investment, the corporate credit union must conduct and document an analysis that reasonably concludes the foreign issue or issuer has no more than a minimal amount of credit risk;
   2. (2) For each approved foreign bank line, the corporate credit union must identify the specific banking centers and branches to which it will lend funds;
   3. (3) Obligations of any single foreign obligor may not exceed 25 percent of total capital or $5 million, whichever is greater; and

   4. (4) Obligations in any single foreign country may not exceed 250 percent of capital.

      Part III

   5. (a) A corporate credit union that has met the requirements established by NCUA for this Part III may enter into derivative transactions specifically approved by NCUA to:

      1. (1) Create structured products;
      2. (2) Mitigate interest rate risk and credit risk on its own balance sheet; and
      3. (3) Hedge the balance sheets of its members.

   6. (b) Credit Quality:

      All derivative transactions are subject to the following requirements:

      1. (1) If the intended counterparty is domestic, the counterparty must meet minimum credit quality standards as established by the corporate credit union's board of directors;
      2. (2) If the intended counterparty is foreign, the corporate credit union must have Part II expanded authority and the counterparty must meet minimum credit quality standards as established by the corporate credit union's board of directors;
      3. (3) The corporate credit union must identify the criteria relied upon to determine that the counterparty meets the credit quality requirements of this part at the time the transaction is entered into and monitor those criteria for as long as the contract remains open; and

      4. (4) The corporate credit union must comply with § 704.10 of this part if the credit quality of the counterparty deteriorates below the minimum credit quality standards established by the corporate credit union's board of directors.

         Part IV

         A corporate credit union that has met all the requirements established by NCUA for this Part IV may participate in loans with member natural person credit unions as approved by the NCUA and subject to the following:

      5. (a) The maximum aggregate amount of participation loans with any one member credit union must not exceed 25 percent of capital; and
      6. (b) The maximum aggregate amount of participation loans with all member credit unions will be determined on a case-by-case basis by the NCUA.

[75 FR 64851, Oct. 20, 2010, as amended at 77 FR 74111, Dec. 13, 2012; 80 FR 25939, May 6, 2015; 82 FR 55500, Nov. 22, 2017; 85 FR 62212, Oct. 2, 2020]