The purpose of this policy is to provide requirements and specific guidelines for investments of the National Credit Union Share Insurance Fund (Share Insurance Fund). The policy is set forth in the following sections:
- Autoridad estatutaria
- Objectives
- Composition and Responsibilities of the Investment Committee
- Authorized Investments
- Requisitos de informes
- Controles internos
I. Autoridad estatutaria
The NCUA Board’s investment authority for the Share Insurance Fund is derived from Title II, Section 203 of the Federal Credit Union Act [12 United States Code (U.S.C.) 1783(c)]. This section states “The Board may authorize the Secretary of the Treasury to invest and reinvest such portions of the fund as the Board may determine are not needed for current operations in any interest-bearing securities of the United States or in any securities guaranteed as to both principal and interest by the United States or in bonds or other obligations which are lawful investments for fiduciary, trust, and public funds of the United States, and the income therefrom shall constitute a part of the fund.”
II. Objectives
The primary objectives for investing funds of the Share Insurance Fund, in order of priority, are as follows:
- Meet liquidity needs resulting from current operations of the Share Insurance Fund using a “buy and hold” approach.
- Invest any excess cash in authorized investments seeking to optimize the yield of the portfolio over the long run consistent with the liquidity needs of the fund.
III. Composition and Responsibilities of the Investment Committee
El Comité de Inversión está compuesto por los siguientes cargos (o cargos sucesores equivalentes):
- Director, Office of Examination and Insurance (chair of the committee);
- Chief Financial Officer;
- Chief Economist;
- General Counsel; and
- Presidente, Planta central de liquidez
The Investment Committee will use NCUA and Central Liquidity Facility staff and/or outside experts to provide advice, as necessary.
The Investment Committee will meet no less than quarterly to review cash flow projections, discuss interest rate movements and economic forecasts, make changes to the investment strategy as appropriate, and make other decisions as needed. A quorum (which is no less than three members) of the Investment Committee must be present for all meetings; however, all members will strive to be present at each meeting. In the event an Investment Committee member cannot be present, and the meeting cannot be rescheduled, the person acting in the position of the absent member may attend the meeting and vote. All decisions require a majority of voting members present.
The Investment Committee is responsible for developing the strategy necessary to implement the objectives established by the NCUA Board consistent with the limitations and conditions of this policy. The Investment Committee is delegated the authority to purchase and sell authorized investments consistent with the limitations and conditions of this policy (see NCUA Board Delegation of Authority INS 5).
Specific responsibilities of members of the committee are as follows:
| Individuo | Responsabilidad |
|---|---|
| Directora de la Oficina de Análisis y Seguro | Serve as chair of the committee and set meeting agenda. Establish and maintain written procedures for the management of the Share Insurance Fund investment portfolio in consultation with committee. Monitor interest rates and economic conditions. Monitor credit union performance as it relates to the potential funding needs for 208 assistance and resolution costs. Evaluate and recommend changes to the Share Insurance Fund investment strategy. Provide expert investment and portfolio management information. |
| Director financiero | Monitor Treasury market conditions. Maintain meeting minutes. Review the accuracy of cash flow reporting and develop cash flow forecasts. Develop annual projections of monthly changes in the Share Insurance Fund ending account balance. Instruct the Treasury Department on investment transactions. Prepare a monthly Share Insurance Fund Report containing investment performance data. |
| Economista principal | Monitor interest rates and economic conditions. Evaluate fiscal and monetary policy issues. Provide expert economic information. |
| Asesor general | Provide legal advice on matters pertaining to the work of the Investment Committee, as necessary. |
| Presidente, Planta central de liquidez | Monitor interest rates and economic conditions. Provide Central Liquidity Facility membership, borrowing authority, and investment and portfolio management information. |
IV. Authorized Investments
By law, the Share Insurance Fund is permitted to invest its available cash determined not needed for current operations only in interest-bearing securities of the United States, in any securities guaranteed as to both principal and interest by the United States, or in bonds or other obligations which are lawful investments for fiduciary, trust, and public funds of the United States [12 U.S.C. 1783(c)].
The Investment Committee is authorized to purchase any securities sold through the U.S. Treasury, provided they are consistent with the committee’s investment strategy and the following constraints:
- Vencimiento máximo de 10 años.
- No more than 50 percent (par amount) of the Share Insurance Fund may have maturities longer than 5 years.
The Department of the Treasury Financial Manual Section 4335.95 states “A Federal Program Agency for a Government Investment Account shall, to the best of its ability, develop its investment strategy to select investments with Maturity Dates that coincide approximately with the Federal Program Agency’s disbursement estimates, so that the investments may be bought and held to the Maturity Dates.” The policy also states, “A Federal Program Agency for a Government Investment Account shall not engage in investment practices, including but not limited to security day-trading and large restructuring of investment portfolios, to take advantage of short-term Interest Rate fluctuations or to result in gains and losses.”
Therefore, the Investment Committee will employ an investment strategy that provides for expected and probable liquidity needs, operating costs, and historical and/or projected problem or failing credit union financial assistance and resolution costs without having to sell securities or rely on borrowing. Also, while securities may be sold to meet liquidity needs in exigent circumstances, they will not be sold to attempt to take advantage of anticipated movements in interest rates.
V. Reporting Requirements
Management review of the performance of the investment portfolio is necessary to evaluate the effectiveness of the strategy in meeting the objectives and policies established by the NCUA Board.
Monthly reports will be prepared by the Chief Financial Officer for the Investment Committee and the NCUA Board. These reports will include the following investment information, at a minimum:
- Book value vs. market value;
- Yield on the securities;
- Comparative yield information;
- Maturity schedule; and
- Listing of new investments.
Summary investment performance information will be included in the quarterly National Credit Union Share Insurance Fund Financial Overview and Performance report made available to the public.
VI. Internal Controls
A system of internal controls will be maintained to promote efficiency and safeguard the assets of the Share Insurance Fund. A segregation of duties between investment authorization and the record-keeping function will be maintained.