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2010 will be pivotal says NCUAs Marquis
BOSTON (6/25/09)--2010 will be a pivotal year on the credit union regulatory scene, National Credit Union Administration (NCUA) Executive Director David Marquis told a Wednesday morning breakout session on legislative and regulatory issues during the America’s Credit Union Conference (ACUC) in Boston.
National Credit Union Administration Executive Director David Marquis painted a picture for 2010 that includes "a small tidal wave" in losses at credit unions, especially at the end of the recession. He spoke during a legislative/regulatory breakout session Wednesday at America’s Credit Union Conference and Expo (Photos provided by CUNA)
Marquis noted that credit unions will have seven years to pay for corporate stabilization, with charges to the premiums estimated at 10 to 15 basis points a year. Reserve losses will go up, not down. “We still have allowances for loan losses to add to the corporate stabilization program,” he said, and there will be more pressure as the year continues for a convergence between groups’ estimates of losses and the actual losses. He anticipates that NCUA’s corporate credit union rulemaking will be proposed this fall, with a final rule perhaps by next spring. (See related story: NCUA: What corporate reform could look like) “We don’t know how many corporates there will be. It depends on how many you want to support,” he said, noting that short-term bonds are still in corporate portfolios and “selling them now would be a disaster.” For now, NCUA’s strategy includes sustaining the weakened corporates. “If you don’t, our hand will be forced and bigger losses will occur.” He noted that if corporates had not been insured, the movement would have lost 2,000 natural-person credit unions, who’ve suffered about $4 billion in losses. The fact that only credit unions put money into corporate credit unions is “a systemic problem in the corporate credit union structure.” “In the 90s, I thought I saw the worst of the worst (for natural-person credit unions). I was wrong,” he said. During the 80s, 1,300 credit unions closed or merged during that recession. In the 90s, credit unions lost money. “The biggest loss to the share insurance fund comes at the end of a recession,” Marquis added. Other factors include credit unions’ more aggressive pursuit of more complex services such as member business loans and home equity lines of credit. Also, some states are delaying foreclosures, which means foreclosures will pile up later. “There’s a small tidal wave coming,” Marquis warned. “2010 will be our pivotal year to get through.” He said NCUA is already reallocating resources so more experienced examiners are working with credit unions in troubled areas, and its board authorized hiring 50 more people this year.
Protecting credit unions' tax exempt status in a "very ambitious Congress" processing bills through at "breakneck speed" is only one priority of the Credit Union National Association (CUNA), John Magill, CUNA’s senior vice president of legislative affairs, told a breakout session at America's Credit Union Conference and Expo in Boston.
CUNA also had two speakers at the session. John Magill, senior vice president of legislative affairs at CUNA, said a “very ambitious Congress” is proposing legislative measures “at breakneck speed.” Two recent actions--credit card reform and the housing bill that contains corporate credit union stabilization fund--are of key interest to credit unions, Magill said. So far, no bill that has passed has included the interchange issue or mortgage cramdowns related to bankruptcies, but both issues likely are showing signs of resurfacing. Upcoming legislative issues include; member business lending, “which is always on a front burner for CUNA”; alternative capital; data security; student lending, where the federal government would involve itself in student lending and move aside private student lending; and Internet gambling. CUNA will continue working to protect credit unions’ tax exempt status, he said. “The tax exemption is worth $1.5 billion to $1.8 billion a year. If legislators are looking at health care funds and are down to $10 billion, we’re worried they will look elsewhere for funds. We’ll always have one eye open that issue.” The new Consumer Financial Products Agency has the potential to reduce regulatory burden, “but the devil’s in the details,” Magill said. CUNA is working closely with Harvard Professor Elizabeth Warren who is heading up the effort. “It’s important to not walk away in the beginning. If we can do better, we intend to do so. We did that with the cramdown measure. We’ll try to make a bad bill less bad, if possible.” Magill urged credit unions to contact their members of Congress to stress the importance of maintaining an independent credit union regulator. “Next week Congress is off. Pick up the phone and tell how important this bill is. Help us help you, and vice versa.” Also, CUNA Deputy Counsel Mary Dunn outlined four critical regulatory issues for credit unions:
* Regulatory restructuring. The proposed Consumer Financial Protection Agency is a “glass half empty, glass half full scenario,” Dunn said. “The fact that the agency is on the drawing board gives credit unions an important opportunity to be at the table and negotiate the best deal for credit unions.” It has serious implications as Congress addresses the full length and breadth of regulations that will be implemented. She noted that the proposal would give the Fed more authority over payments and settlements systems, which are not under regulatory oversight. The corporate credit unions could be swept into this. Corporates have a raised level of systemic risk, but for now, are not under the proposal. The present proposal does not seek to include NCUA. *
Mary Dunn, deputy general counsel of the Credit Union National Association (CUNA), outlined four issues critical to credit unions during America’s Credit Union Conference and Expo in Boston. They are: regulatory restructuring, changes at the top level of the National Credit Union Administration, examination issues, and corporate credit union system issues.
Top level changes at NCUA. The nomination of Debbie Matz as NCUA chair has been sent to the Senate. “Everytime we get someone new, there are changes. We will be on the lookout for new agendas, Dunn said. * Examination issues on the horizon. Dunn says credit unions are not as much concerned about the substance of the examinations as about the methodology used in insisting on a particular course of action. NCUA’s newly issued letter is “very positive in reinforcing that examiners want to work with credit unions that are in more difficult positions on net worth because of the stabilization process.” * Corporate credit union issues. Credit unions are being asked to help determine what the future corporate credit union system should be. It’s owned by credit unions, which means they “share in good times and share in the bad.” “Implementation of new legislation directs that the costs of the corporate system stabilization spread out.” Credit unions are encouraged to think, talk to their leagues, and CUNA. She noted a task force on the issue and said CUNA is working jointly with the National Association of Federal Credit Unions to present ideas to NCUA.
The CUNA-sponsored XCUC conference ended Wednesday.


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