Administration has tentatively approved a regulation that would force credit unions to take a long, hard look at potential risk before making investments. The board gave initial approval to the proposal at its monthly meeting Thursday. The proposed regulation would require more documentation of holdings and policies, and would restrict credit unions from investing in some securities that the agency has deemed too risky. "We're putting the burden on them to monitor their activities," NCUA Chairman Norman E. D'Amours said. The proposal would require credit unions to adopt a written investment policy, including risk management procedures; do credit analyses of the investment's issuers, unless they are government agencies; and create monthly reports detailing characteristics and changes in returns or values of each security in the portfolio. Investments that would be restricted under the proposal include those related to small businesses, commercial mortgages, and mortgage servicing rights, among others. Board members expressed some concerns with the proposal, saying that some smaller credit unions may be put off by its length and complexity, and that some requirements "go beyond the normal course of business." But a trade group source familiar with the proposal said it is a step in the right direction. "If you want a good investment plan, this is what you ought to do anyway," the source said. No date has been set for publication in the Federal Register, which has been delayed because of the government shutdown. Once the rule is published, there will be a 120-day comment period. Meanwhile, the board approved a 6.6% cut for 1996 in the operating fee that credit unions pay to the regulator. The cut, reflecting a continuing budget surplus, will be the third in three years; this year's was 7.3%.
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