Cossec President Mabel Jiménez-Miranda.
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The Federal Home Loan Bank has put out a regulatory interpretation that discusses the eligibility of Puerto Rican “cooperativas” for FHLB membership.
The document, titled “Regulatory Interpretation 2024-RI-01,” discusses the topic addressed by the Federal Housing Finance Agency (FHFA), and concludes that “cooperativas,” like state-chartered credit unions without federal share insurance, that are certified as Community Development Financial Institutions (CDFIs) by the CDFI Fund of the U.S. Department of the Treasury, are classified as “CDFI credit unions” for membership purposes.
In contrast, those not certified as CDFIs are considered “non-federally insured credit unions.”
The document notes that “cooperativas” are state-chartered credit unions in Puerto Rico, insured by the Public Corporation for the Supervision and Insurance of Cooperatives of Puerto Rico (Cossec) instead of the National Credit Union Administration’s Share Insurance Fund.
“This interpretation represents a significant step forward for cooperatives and the communities they serve in Puerto Rico. The classification of cooperatives as ‘CDFI credit unions’ or ‘non-federally insured credit unions’ based on their certification as community development financial institutions simplifies the process of determining eligibility for membership in the FHLB,” she added.
This clarity provided by the FHFA makes it easier for Puerto Rican cooperatives to access financial services and stability, “which is essential for the economic growth and development of our communities,” she said.
“We thank the FHFA for its commitment to inclusion and support of Puerto Rico cooperatives, as well as for recognizing the vital role that these institutions play in the social and economic fabric of our island,” said Jiménez-Miranda. “We hope to continue collaborating with the FHFA and other government agencies to continue advancing the financial inclusion and sustainable development of Puerto Rico”
As of May 18, 2023, most of the 102 existing “cooperativas” have been certified as CDFIs, though none are currently FHLB members.
In its document, the FHLB elaborates on the membership regulation, noting eligibility is limited to specific financial institutions meeting certain requirements, including organization under appropriate laws, subject to regulation, engagement in long-term home mortgage loans, financial condition, management quality, and home financing policy.
Specifics include adjustments for insured depository institutions and alternative eligibility for entities not meeting traditional insured depository institution criteria, particularly focusing on mortgage-related assets and commitment to housing finance.
For state-chartered credit unions without federal share insurance, including “cooperativas,” the regulation delineates between “CDFI credit unions” and “non-federally insured credit unions” (NFICUs), treating them distinctly for membership eligibility.
This differentiation was introduced to accommodate the unique status of such institutions within the regulatory framework, with CDFI credit unions being treated as CDFIs and NFICUs as insured depository institutions for eligibility purposes.
Regarding “cooperativas,” those certified as CDFIs are treated as “CDFI credit unions,” while those not certified fall under the NFICU category. Eligibility criteria for membership involve demonstrating financial condition, management quality, and adherence to regulatory standards, with specific provisions for “cooperativas” in relation to federal share insurance eligibility and mortgage-related asset commitments.
The document emphasizes that the interpretation clarifies the classification of “cooperativas” for FHLB membership eligibility, aiming to ensure appropriate classification and facilitate their participation in the FHLB system.
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