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Brand capital levels student loans spike ACUC interest
BOSTON (6/24/09)--National branding, capital levels and students loans—not the corporate credit union stabilization plan—were the focus of questions to the Credit Union National Association’s (CUNA) senior management team during Tuesday morning’s general session at the America’s Credit Union Conference and Expo (ACUC). Fielding questions from attendees were CUNA President/CEO Dan Mica; Eric Richard, executive vice president and general counsel; John Magill, senior vice president of legislative affairs; Mary Dunn, deputy general counsel of regulatory advocacy; and Bill Hampel, senior vice president and chief economist. Among the questions and answers: Q: Would CUNA leverage the positive press credit unions have received through the recession to build a national brand to take credit unions to a new level in the public’s awareness? A: “I’m ready today,” said Mica. “America’s Credit Unions logo sells well and has been a huge positive force.” However, he noted, successful campaigns like the “Got Milk?” and “Pork, the other white meat” cost $40 million to $50 million a year with a minimum five-year commitment to be successful. In comparison, CUNA’s dues are about $20 million. An option would be for CUNA to prepare the ads and send them to the leagues to implement. Another option, he said: going viral, by using the Web and the Internet. Q: The capital level required is 7%. Where will the target for capital levels be in the future, and what’s the value of secondary capital? A: “I have revised my view and am now comfortable with 8-10% capital, instead of the original 7%-9%,” said Hampel. He doubted credit unions will have to increase their capital required, but does not expect a reduction either in required capital. “Credit unions will need alternative access to capital,” he said. Q: Is risk-based capital dead? A: “It’s not on a connected decline,” said Mica, noting that a survey on capital asked if credit unions would take external capital--such as offering a normally 4% CD at 5% to 6%, with part of it uninsured. “A percentage could be offered only to members and any other outside investments, but if you don’t offer both, it won’t be worthwhile.” He noted CUNA would try to get alternative capital measures passed. Q: With low interest rates today continuing down the road, will long-term low-fixed-rate mortgages squeeze credit union earnings down the road? A. Hampel said there is not much interest-rate risk unless international investors take out their money on Treasury securities. However, he urged credit unions to “be cautious when interest rates dip and refinancings pick up. Be careful not to have too many.” Q: Congress has been flooded with the administration’s proposals. How long can it continue at this rate without reaching exhaustion? A: Magill noted Congress can go forever at this rate and that the system is unlikely to break down. However, many measures—such as health care and energy--are on the front pages and costly. “Our challenge as credit unions is to come out on top of the heap. We have a 6% market share, so we can do well getting our message across.” Q: Federal student loans cost too much money compared with the commercial rate. As a result, student loans may not be profitable. A: “Congress is in mind to get out of the student loan business,” said Magill. “But it doesn’t want the private sector to offer student loans. We don’t have an answer,” he said but promised that News Now would update readers in the next few days. Q: Our credit union originates mortgages and we’ve been told to hold 5% to 10% of our mortgages. A: Mary Dunn said this is a priority for the administration to “make sure that originations don’t just sell downstream. We’ll work very closely with the administration to make sure credit unions won’t be at a disadvantage. Mica noted that when he visited the White House recently, the president orally stated that he intended to raise the capital requirement for every financial institution in the U.S. “This would have a profound effect on credit unions.” It’s one more area to review, he said. ACUC ends today in Boston. Follow the events via the ACUC weblog by News Now and the convention’s Daily Wednesday by using the links.
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