Financial Derivatives Transactions To Offset Interest Rate Risk; Investment and Deposit Activities, 37030-37034 [2011-15738]

Agencies

• National Credit Union Administration

[Federal Register Volume 76, Number 122 (Friday, June 24, 2011)]
[Proposed Rules]
[Pages 37030-37034]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-15738]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 703


Financial Derivatives Transactions To Offset Interest Rate Risk; 
Investment and Deposit Activities

AGENCY: National Credit Union Administration.

ACTION: Advance Notice of Proposed Rulemaking.

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SUMMARY: Through this Advance Notice of Proposed Rulemaking (``ANPR''), 
the National Credit Union Administration (``NCUA'') requests public 
comments on whether and how to modify its rule on investment and 
deposit activities to permit a natural person credit union to engage in 
the purchase and sale of financial derivatives for the purpose of 
offsetting interest rate risk. Although permitted by law, NCUA 
currently allows only a limited number of credit unions, on a case-by-
case basis, to engage in such transactions under an investment pilot 
program.

DATES: Comments must be received on or before August 23, 2011.

ADDRESSES: You may submit comments by any one of the following methods 
(Please send comments by one method only):
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     NCUA Web Site: thttps://www.ncua.gov/RegulationsOpinionsLaws/proposed_ regs/proposed_regs.html. Follow the 
instructions for submitting comments.
     E-mail: Address to regcomments@ncua.gov. Include ``[Your 
name] Comments on Part 703 ANPR, Financial Derivatives Transactions to 
Offset Interest Rate Risk'' in the e-mail subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for e-mail.
     Mail: Address to Mary Rupp, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.

FOR FURTHER INFORMATION CONTACT: Jeremy Taylor, Senior Capital Market 
Specialist, telephone: 703/518-6628.

SUPPLEMENTARY INFORMATION:

I. Background

    A. Financial Derivatives Transactions. A financial ``derivative'' 
is a financial contract, the value of which is derived from the 
performance of an underlying asset or market index. An interest rate 
``swap,'' for example, may be tied to short-term ``LIBOR rates'', which 
are variable, and long-term ``swap rates,'' which are fixed. The 
parties to an interest rate ``swap'' transaction can agree to exchange 
fixed cash flows for variable cash flows. The purpose may be either 
speculative or to reduce risk.
    A credit union may enter into a derivatives transaction to protect 
itself against interest rate risk. For example, a credit union that has 
invested its deposits in a portfolio of mortgages that pays a fixed 
rate of interest is exposed to risk of an upward movement in interest 
rates. On members' variable rate

[[Page 37031]]

deposits, the credit union will be forced to increase the rates it pays 
in order to stay competitive, while the cash flows received from its 
portfolio of fixed-rate mortgages remains static. As interest rates 
rise, the credit union's net interest margin shrinks, and the value of 
the mortgages diminishes.
    To offset the impact of rising interest rates, a credit union could 
enter into an interest rate ``swap'' in which it exchanges with a 
counterparty the fixed-rate cash flows it receives from its mortgages 
for variable-rate cash flows that fluctuate with the yield it must pay 
on members' deposits. As a result, the credit union's cost of funds 
remains the same regardless of interest rate movements.
    Alternatively, a credit union could purchase an interest rate 
``cap'' that would effectively fix the cost of funds at a pre-agreed 
ceiling. For a premium paid by the credit union, the counterparty 
agrees to make payments to the credit union when the referenced 
variable market rate exceeds the contractual ceiling rate. This payment 
would occur at the end of each period in which a referenced rate, like 
LIBOR, exceeds the agreed ceiling rate. The interest rate ``cap'' acts 
as insurance against rising interest rates since the credit union's 
cost of funds on the amount hedged will be offset by counterparty's 
payments in excess of the interest rate ceiling. The counterparty thus 
absorbs the risk of significant interest rate increases above the 
contractual ceiling rate.
    B. Authority To Invest in Financial Derivatives. The purchase and 
sale of financial derivatives, provided it is for the purpose of 
offsetting interest rate risk (``IRR''), is recognized as an 
``incidental power'' granted by the Federal Credit Union Act (``the 
Act'') to enable a federally-chartered credit union (``FCU'') to carry 
on the business for which it was incorporated. 12 U.S.C. 1757(17); NCUA 
General Counsel Opinion No. 99-0229 (Feb. 23, 1999).
    To implement the investment authorities of FCUs, part 703 of NCUA's 
Rules and Regulations, 12 CFR 703, identifies the investments and 
investment activities authorized by the Act and imposes requirements 
and restrictions in order to preserve the safety and soundness of the 
credit unions that hold the investments and engage in the activities. 
Id. Sec. Sec.  703.13, 703.14. Part 703 further identifies certain 
investments that it prohibits for safety and soundness reasons even 
though they are authorized by the Act. Id. Sec. Sec.  703.15, 703.16. 
Among these prohibited transactions, with certain exceptions, are 
financial derivatives such as futures, options, interest rate swaps and 
forward rate agreements. Id. Sec.  703.16(a). Hence, FCUs are generally 
prohibited from engaging in financial derivatives transactions that are 
utilized by many financial institutions for the purpose of offsetting 
their IRR.
    Part 703 provides for an exemption from the prohibition against 
derivatives transactions in the form of an investment pilot program 
(``Pilot Program'') that ``permit[s] a limited number of [FCUs] to 
engage in investment activities prohibited by this part but permitted 
by the Act.'' Id. Sec.  703.19(a). An FCU seeking to establish a Pilot 
Program of its own to engage in a prohibited activity must obtain NCUA 
approval. Id. Sec.  703.19(b). To be eligible for approval, an FCU must 
have a minimum net worth classification of ``well capitalized'' and 
must document its Pilot Program's benefits, costs, internal controls, 
monitoring systems, and impact on the financial performance, risk 
profile and asset-liability management strategies of the FCU. Id. 
Presently, there is no limit to the duration of an approved Pilot 
Program.
    A third party seeking to establish a Pilot Program to engage in a 
prohibited activity on behalf of client FCUs also must obtain NCUA 
approval. Id. Sec.  703.19(c). To be eligible for approval, a third 
party must describe its Pilot Program's activities and document the 
benefits and risks to FCU clients with whom it has contracted. Id. If 
the third party's Pilot Program is approved, an FCU client generally 
does not need to obtain NCUA approval for itself to participate. Id. 
Sec.  703.19(d).
    C. Pilot Programs To Engage in Derivatives Activities. Pilot 
Programs allowing investment activities prohibited by part 703 that are 
otherwise lawful have been available on a case-by-case basis since 
1998. 62 FR 32989, 32999 (June 18, 1997). The NCUA Board has since 
approved Pilot Programs authorizing two FCUs to each independently 
engage in derivatives activities for IRR management purposes on its own 
behalf. Under NCUA's Standards for Participating Credit Unions and 
Third-Party Derivatives Pilot Program Applicants (``3rd party approval 
standards''),\1\ the NCUA Board approved Pilot Programs authorizing 
three third-party entities to engage in such activities to manage the 
IRR of their client FCUs--Western Corporate FCU (``WesCorp'') in 2000, 
ALM First Financial Advisors, Inc. (``ALM 1st'') in 2002, and Southwest 
Corporate Investment Services, a credit union service organization 
(``Southwest CUSO'') in 2005.\2\ Operating standards governing an FCU's 
or a third party's approved Pilot Program to engage in derivatives 
activities to offset IRR are set forth in the approvals for each of 
these Pilot Programs.
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    \1\ The third party approval standards are available on NCUA Web 
site: https://www.ncua.gov/Resources/ALManagementInvest/Investment.aspx. Although FCU participation in a third party Pilot 
Program generally does require NCUA approval, 12 CFR 703.19(d), FCUs 
participating in a third party's Pilot Program to engage in 
derivatives activities must obtain Regional Office permission to 
participate. There are no approval standards that apply to an FCU 
seeking approval of its own Pilot Program to independently engage in 
derivatives transactions for its own benefit.
    \2\ The approval of WesCorp's Pilot Program effectively 
terminated when WesCorp was liquidated in October 2010. ALM 1st 
presently has 9 FCU clients, 6 of whom migrated from WesCorp's Pilot 
Program. The approval of Southwest CUSO's Pilot Program survives 
despite the liquidation of Southwest Corporate FCU in October 2010. 
Upon information and belief, however, Southwest CUSO has never had 
any FCU clients.
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    Since the inception of Pilot Programs allowing investment 
activities prohibited by part 703, the NCUA Board has generally limited 
its approval of FCUs seeking to independently engage in derivatives to 
offset IRR, primarily for two reasons. First, such derivatives present 
risks that generally are not familiar to FCUs. Second, FCU demand for 
such instruments has been low. Also for these reasons, the NCUA Board 
thus far has not reconsidered whether to permit derivatives activities 
on an elective basis, as other federal financial institution regulators 
do, instead of only under an approved Pilot Program.
    D. Policy Alternatives to Existing Pilot Programs. In 2010, 
Congress enacted the Dodd-Frank Wall Street Reform and Consumer 
Protection Act, Public Law 111-203, 124 Stat. 1376 (``Dodd-Frank''), to 
reduce risk, increase transparency and promote market integrity within 
the financial system. To that end, section 723(a)(3) of Dodd-Frank 
requires ``financial entities'' to clear their derivatives transactions 
through a ``derivatives clearing organization,'' i.e., a clearinghouse, 
unless an exception to mandatory clearing applies. 7 U.S.C. 2(h)(1)(A), 
2(h)(7)(A)(i). That section directs the Commodity Futures Trading 
Commission (``CFTC'') to consider whether to exempt certain financial 
institutions, including credit unions with total assets of less than 
$10 billion, from the clearing mandate's ``financial entity'' 
definition. Id. Sec.  2(h)(7)(C)(ii)(III).
    The CFTC recently issued for comment a proposed rule on ``End-User 
Exception to Mandatory Clearing of Swaps.'' 75 FR 80747 (December 23, 
2010). The proposed rule introduces

[[Page 37032]]

new requirements governing the elective exception to mandatory clearing 
of swaps available to swap counterparties, for which credit unions may 
qualify. Excepted institutions would be required under the rule to 
report derivative positions to a registered swap data repository, and 
to provide certain items of information. This information would 
describe how the excepted entity meets its financial obligations 
associated with non-cleared swaps, including methods used to mitigate 
credit risk. The information would also indicate the status of the 
entity that qualifies it for an ``end-user exception'' to the clearing 
mandate, and how the reported derivative is being used to mitigate 
commercial risk.
    In view of the Dodd-Frank clearing mandate, and with the benefit of 
12 years' experience with Pilot Programs allowing derivatives 
activities, it is timely for the NCUA Board to reconsider, and resolve 
issues related to, whether and under what conditions it should permit 
natural person FCUs to engage in derivatives transactions for the 
purpose of offsetting IRR, i.e., whether through approved third parties 
or independently.
    NCUA is disinclined to allow FCUs to engage in derivatives 
activities unconditionally for several reasons. First, NCUA must ensure 
that FCUs do not use derivatives for the unauthorized purpose of 
speculation. Second, the value of the cash flow streams from derivative 
transactions can be unusually volatile because the value is driven by 
the movement of interest rates and level of volatility in financial 
markets and this value can therefore itself be volatile. Finally, it is 
reasonable to condition participation in derivatives activities on the 
FCU's development of sufficient expertise and infrastructure to manage 
IRR and credit risks associated with derivatives in financial markets. 
For these reasons, NCUA is reconsidering permitting FCUs to engage in 
derivative activity only on the basis of a waiver of the existing 
regulatory prohibition, subject to compliance with appropriate 
conditions.
    In reconsidering derivatives activity by FCUs for the purpose of 
offsetting IRR, the NCUA Board seeks public comment--in the form of 
answers to the specific questions set forth under ``Issues for 
Comment'' below--on five different policy alternatives: (A) Whether to 
discontinue allowing Pilot Programs for FCUs and third parties to 
engage in derivatives activity to offset IRR and, if so, whether to 
terminate such existing Pilot Programs; (B) Whether to allow FCUs to 
engage in such derivatives activities through a third party on a case-
by-case basis (i.e., by waiver) provided the FCUs meet prudential 
standards applicable to the third party and the FCU; (C) Whether to 
allow FCUs to independently engage in such derivatives activities by 
waiver provided they meet prudential standards; and (D) What approval 
standards should be established to govern the evaluation of an FCU's 
request for approval to engage in derivatives through a third party; 
(E) What approval standards should be established to govern the 
evaluation of an FCU's request to engage in derivatives independently?

II. Issues for Comment

    To facilitate consideration of the public's views, please address 
your comments to the questions set forth below on each issue, and 
organize and identify them by corresponding question number so that 
each question is addressed separately. To maximize the value of public 
input on each issue, it is also important that commenters provide and 
explain the reasons that support each of their conclusions. There will 
be a further opportunity to comment on these issues should the NCUA 
Board issue a proposed rule modifying its present policies on financial 
derivatives activities to offset IRR.

A. Existing Pilot Programs

    NCUA believes it is timely to determine whether existing Pilot 
Programs are either to be terminated or incorporated as a permissible 
activity.
    Question No.
    1. Should existing Pilot Programs for FCUs to engage in derivatives 
for IRR management be permitted to continue? Explain why or why not.
    2. Should such Pilot Programs for FCUs be permitted to continue by 
``grandfathering'' the previous approvals into Part 703? Explain why or 
why not.
    3. If FCUs seek an end-user exception from mandatory clearing as 
contemplated by the CFTC's proposed rule, they would need to provide 
items of information to a registered swap data repository. In view of 
this requirement, should NCUA permit FCUs to seek an end-user 
exception? Explain why or why not.

B. Third Party Derivative Authorization

    In approving third party Pilot Programs, the NCUA Board sought to 
ensure that FCUs would engage in derivative activities in a safe and 
sound manner while allowing FCUs that lacked experience in derivatives 
to gain this experience. 62 FR at 32999. To achieve that goal, NCUA 
created standards for third party Pilot Programs (see note 2 supra) and 
expected an FCU to perform initial and ongoing due diligence of any 
third party provider that it uses. The standards cover requirements for 
the FCU and for the third-party providers. The requirements for an FCU 
applicant address its financial condition, required actions of the 
board of directors, accounting standards, counterparty credit quality, 
hedge transactions, modeling, internal controls, legal issues, 
transaction termination, and NCUA approval. The requirements for third-
party applicant address contractual agreements, ongoing risk 
assessment, review of credit union internal controls, reporting to 
NCUA, credit union education, and the maximum number of participants 
with each third party.
    The Pilot Program standards for an FCU engaging in third party 
derivatives activity are as follows:
    Financial Condition. The FCU must have:
     Minimum net worth ratio of 7 percent or more; and
     Positive, stable earnings for preceding 12 months.
    Board of Directors. The FCU's board of directors must:
     Approve the counterparty or counterparties.
     Update, at least quarterly, the credit rating and analysis 
of approved counter-parties.
     Approve the proposed types of derivative transactions, the 
maximum limits for aggregate notional principal amounts permitted for 
each type of transaction deemed appropriate by the FCU's board of 
directors. The maximum limit on derivative exposure in notional terms 
should be stated as a percentage of net worth. The maximum notional 
limit for swaps plus the value of the underlying securities in option 
transactions must not exceed 250 percent of net worth.
     Determine hedge objectives and parameters and designate 
what correlation measures will be utilized. Approve correlation targets 
and tolerance limits prior to execution of each individual transaction.
     Understand, review and approve each transaction prior to 
execution and affirm that transactions will be used solely to reduce 
interest rate risk.
     Ensure management monitors the effectiveness of the hedge 
on at least a quarterly basis (preferably monthly) and reports this 
information to the board.
     Require management demonstrate it has adequate knowledge 
to understand and monitor hedge positions using derivative instruments.

[[Page 37033]]

    a. Accounting Standards. The FCU will:
     Commit to an annual independent audit of financial 
statements. The statements will be prepared in accordance with 
generally accepted accounting principles, including FASB ASC 815 
Derivatives and Hedging. The audits will be performed in accordance 
with generally accepted auditing standards by a certified public 
accountant or public accountant licensed by the appropriate state or 
jurisdiction to perform those services.
     Have external auditors review its accounting policies and 
procedures prior to the first transaction. The external auditors will 
opine that the policies are suitable for these transactions.
    b. Counter-party Credit Quality. All counter-parties must be rated 
``AA-'' (or equivalent) or better at the time of any transaction. 
Termination of the transaction is required once a counterparty is 
downgraded to ``BBB'' (or equivalent). When there is a split rating, 
the lower rating will prevail.
    c. Hedge Transactions. The credit union will:
     Identify the circumstances leading to the decision to 
hedge; and
     Specify derivative transactions to be employed and 
definition of:
    [cir] Hedge type (fair value, cash flow, etc); and
    [cir] Analysis to demonstrate effectiveness of hedge.

Shock analysis will not demonstrate correlation. Hedge effectiveness 
requires correlation through time, must be set prospectively, and 
effectiveness must be assessed retrospectively. Hedge effectiveness 
reporting will be required of the participating credit union and 
validated by the applicant. Accounting rules require that hedges be 
linked to specific assets or liabilities and cannot be related to 
overall balance sheet risk. Reports of the macro effects of the hedge 
should be limited to the impact of this on the interest rate risk of 
the balance sheet.
    d. Modeling. Any model used to evaluate any hedge transaction using 
derivatives must include the ability to capture all options embedded in 
the transaction. For example, option pricing or option adjusted spread 
modeling using simulation methods may be needed. It must be clear that 
the model functionalities capture the specific behavior of the 
instrument to be hedged and the hedge itself.
    e. Internal Controls. The FCU must have the following procedures 
and controls in place prior to execution of the first transaction.
     Designation of the individual(s) with responsibility for 
purchasing derivative instruments.
     Designation of the individual(s) or departments that have 
accounting and risk reporting responsibilities for the derivative 
instruments and hedge transactions.
     Segregation of duties for the individual(s) obtaining the 
prices of the derivative instruments, hedged items, and other 
instruments associated with reporting the hedge transaction and of 
those that execute the transaction.
     Segregation of duties for the individual(s) with 
derivative instrument reporting and risk assessment responsibility and 
of those involved in the hedge execution.
     Requirement for monitoring hedge performance by the asset/
liability committee and the board.
     Requirement that the derivative and the hedged item be 
priced by an independent third party.
    f. Legal issues
     The FCU's legal counsel must opine that the proposed 
transactions are legal.
     There must be an International Swap and Derivatives 
Association (ISDA) agreement between the counter-party and the FCU.
     The ISDA agreement must be supplemented by a bilateral 
collateral agreement between counter-party and the FCU. The bilateral 
collateral agreements must require the posting of collateral by either 
party that is in a net deficit position on any derivative that has been 
transacted. The agreement should further specify that the collateral 
must be permissible for FCUs to hold and will be held by an independent 
third party.
    g. Transaction Termination. Any cases where designated hedges fail 
the limits of hedge effectiveness must be reported to the board of 
directors and the transaction terminated as soon as practicable. Also, 
termination of the transaction is required as soon as practicable once 
a counterparty is downgraded to ``BBB'' (or equivalent) as noted above.
    Question No.
    1. These third party standards would require replacement of credit 
quality references by functional equivalents. With this change, are the 
third party operating standards required in NCUA's Pilot Program 
generally appropriate to govern the use of derivatives by an FCU 
approved to engage in these activities through a third party? Explain 
why or why not.
    2. If FCUs lacking prior experience with derivatives were required 
to spend a period of time within a third party Pilot Program, what 
period of time and/or number of transactions is reasonable to a safe 
and sound understanding of derivatives? In your answer explain why this 
is sufficient minimum time or number of transactions.

C. Independent Derivatives Authorization

    Even if the NCUA Board allows FCUs having little or no derivatives 
exposure to participate in derivatives activities only through a third-
party provider, it is anticipated that such FCUs may, after a time, 
seek to engage in derivative activities independently of a third party. 
In that event, however, further assessment of the FCU's knowledge, 
expertise, experience and infrastructure would be necessary, prior to 
granting such permission, to determine if the FCU is able to perform 
all aspects of derivatives activity for which the FCU may have 
previously relied on the third-party provider. The NCUA Board expects 
that, during any period of time when the FCU was acting with a third-
party provider, the FCU would enhance its abilities to address asset 
liability analysis and modeling, dynamic hedging functionality, the 
pricing of any derivatives purchased, and the impact of marking-to-
market on the value of derivatives and any hedged items. This enhanced 
expertise would serve as the basis for an application to engage in 
derivatives activity independently for the purpose of offsetting IRR.
    Question No.
    1. Should the NCUA Board consider allowing credit unions to engage 
in derivatives activity independently? Explain why or why not.
    2. What are the attendant criteria, such as, asset size, capital 
adequacy, the balance sheet composition of a credit union, or risk 
exposure with and without derivatives, that NCUA should take into 
consideration in evaluating an FCU's request for approval to engage in 
derivatives independently? Specify and explain any criteria that are 
essential.
    3. Are there specific actions an FCU should expect to take in 
preparation for applying to engage in derivatives activities 
independently? Specify and explain any actions which are needed.

D. Approval Standards for Derivatives Activities Through an Approved 
Third Party

    An FCU that seeks to engage in derivatives activity through a third 
party Pilot Program must request permission from its Regional Office to 
participate (see note 2 supra), must demonstrate adequate expertise and 
infrastructure to engage in these transactions prior to doing so, and 
must provide documentation to the Pilot Program

[[Page 37034]]

provider. An FCU must operate according to the third party pilot 
program standards when it is approved to engage in derivatives 
activities through an approved third party. NCUA therefore seeks 
comment on the approval standards for an FCU seeking to engage in 
derivatives activity through a third party.
    Question No.
    1. Should NCUA require an FCU to state a balance sheet management 
plan to hedge IRR based on risk management objectives as a condition 
for approval? Explain why or why not.
    2. Is it useful for an FCU to rely on the expertise of a third 
party to assess the effectiveness of derivatives to hedge IRR on an 
ongoing and dynamic basis or should the FCU be required to demonstrate 
it has this expertise internally as a condition for approval? In either 
case explain why or why not.
    3. Is it useful for an FCU to rely on the expertise of a third 
party to assess the credit quality of derivative counterparties? 
Explain why or why not.

E. Approval To Engage Independently

    NCUA expects that approving an FCU to independently engage in 
derivatives activity would require extensive examination of the 
applicant FCU and also would require enhanced supervision. This 
approval would be similar to the granting of expanded authority for a 
corporate credit union under recently revised Part 704, 75 FR 64786 
(Oct. 20, 2010) and would require a self-assessment by the FCU to 
support its request. The NCUA Board would expect an FCU to address the 
following items prior to granting approval for that FCU to engage in 
derivatives activities independently:
    i. Board of directors' policy identifying the specific purposes of 
specified derivatives activities and stating limits on maximum exposure 
in terms of notional principal amounts and mark-to-market values of 
individual and aggregate swaps;
    ii. Ongoing assessment and reporting to the FCU's board of 
directors of derivative performance in achieving explicit interest rate 
risk management objectives;
    iii. Selection criteria for eligible counterparties that address 
the process of identification and credit monitoring; posting of 
bilateral collateral and process for maintenance of available 
collateral;
    iv. Disclosure of derivative price at time of purchase expressed as 
dollar values of a basis point on each derivative instrument;
    v. Disclosure of costs of terminating any derivatives in the course 
of pursuing any exit strategy.
    NCUA would expect the FCU's board of directors to review policy 
periodically, to review the FCU's derivatives positions on an ongoing 
basis, and to actively enforce compliance with the stated IRR 
management purpose of derivative activities.
    Question No.
    1. Should approval of an FCU to engage in derivatives activities be 
in the form of additional authorization similar to the expanded 
authority available under Appendix B to Part 704--Expanded Authorities 
and Requirements? Explain why or why not.
    2. Should an FCU demonstrate enhanced credit functionality in terms 
of the experience of the FCU's personnel, credit analysis and reporting 
infrastructure in order to evaluate the creditworthiness of derivative 
counterparties? Explain why or why not and describe any minimum 
expectation.
    3. Should an FCU demonstrate enhanced hedging expertise based on 
the experience of FCU's personnel or on additional derivatives 
management infrastructure? Explain why or why not, and describe any 
minimum expectation.
    4. Is one year a sufficient amount of time for an FCU to fully 
prepare a self-assessment and application for approval to independently 
engage in derivatives to offset IRR? Explain why it is sufficient or 
why more time may be required.
    5. Are there any additional aspects of the FCU besides items (i)-
(v) above which NCUA should consider in its approval for the FCU to 
engage in derivatives activity independently? If so, explain why the 
item should be considered.

    By the National Credit Union Administration Board on June 17, 
2011.
Mary F. Rupp,
Secretary of the Board.
[FR Doc. 2011-15738 Filed 6-23-11; 8:45 am]
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