| (a) A credit union shall provide its board of directors
a monthly comprehensive report of investment activities, including:
(1) investments purchased and sold during the month;
(2) unrealized market gains or losses compared to book
value for each security at month's end;
(3) fair or market value of each security;
(4) total book value of investments outstanding at
month's end;
(5) unrecorded and unreported obligations to buy or
sell investments; and
(6) amount of investments, other than deposits and
investments in designated depositories, that are not either issued
by, or fully guaranteed as to principal and interest by, the Federal
Deposit Insurance Corporation, the National Credit Union Administration,
the United States or any agency, enterprise, corporation, or instrumentality
of the United States, or in any trust or trusts established for investing,
directly or collectively, in such securities, obligations or instruments.
(b) The credit union shall also provide a quarterly
report to the board of directors that summarizes the volatility of
the entire security portfolio, if the aggregate amount of securities
with one or more of the features included below exceeds the credit
union's net worth:
(1) embedded options;
(2) remaining maturities greater than three years;
or
(3) coupon formulas that are related to more than one
index or are inversely related to, or multiples of, an index.
(c) The report described in subsection (b) of this
section must provide a reasonable and supportable estimate of the
potential impact, in percentage and dollar terms, of an immediate
and sustained parallel shift in market interest rates of plus and
minus 300 basis points on the:
(1) fair value of each security in the entire portfolio;
(2) fair value of the entire security portfolio as
a whole; and
(3) credit union's net worth.
(d) For the purposes of this section, an embedded option
means a characteristic of an investment that gives the issuer or holder
the right to alter the level and timing of the cash flows of the investment.
Embedded options include call and put provisions and interest rate
caps and floors. Since a prepayment option in a mortgage is a type
of call provision, a mortgage-backed security composed of mortgages
that may be prepaid is an example of an investment with an embedded
option.
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| Source Note: The provisions of this §91.808 adopted to be effective February 11, 2001, 26 TexReg 1137; amended to be effective November 11, 2007, 32 TexReg 7923; amended to be effective July 5, 2012, 37 TexReg 4888 |
