NORWALK, Conn. – NAFCU on Tuesday called on the Financial Accounting Standards Board to exempt credit unions from proposed new disclosures on interest rate and liquidity risk.
NAFCU told FASB that while the rule seeks to protect public investors, unlike public companies, credit unions have few groups that want to see their financial statements, and in most cases it is NCUA or another regulator that is already knowledgeable about a credit union’s financials.
“Credit unions do not have investors, present or potential, are not participants in capital markets in the sense that they cannot raise capital from the markets, and, accordingly, the users of their financial statements do not include investors or persons and entities in capital markets,” wrote Tessema Tefferi, regulatory affairs counsel for NAFCU, in a comment letter submitted on the proposal.
FASB is considering a new rule that would require credit unions and other financial entities to disclose more about the risks they may face in meeting their financial obligations and in dealing with changes in interest rates. The proposal comes as NCUA has proposed a rule requiring all credit unions to develop a formal interest rate risk policy.
Under the proposal, credit unions and banks would have to provide a table showing their available liquid funds – cash, high-quality assets they could sell quickly, and available borrowing capacity – and discuss their exposure to liquidity risk, how it has changed and how they are managing it. Financial institutions would have to provide further information, such as a table of all their financial assets and liabilities broken down by maturity, including off-balance-sheet obligations.
Financial institutions also would have to disclose how changes in interest rates would affect profits and shareholders’ equity.
The FASB proposal would require disclosures about the exposure of a credit union’s financial assets and financial liabilities to fluctuations in market interest rates. Credit unions would have to disclose the carrying amounts of classes of financial assets and liabilities segregated according to time intervals based on contractual repricing of the financial instruments and including the weighted-average contractual yield by class of financial instrument and time interval, as well as the duration of each class of financial instrument. They would have to disclose an interest rate sensitivity table on the effects on net income, and additional quantitative or narrative disclosures necessary for users of financial statements.
The public comment period on the proposal ended Tuesday.