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CUNA Matz seek CU exemption from systemic risk legislation
WASHINGTON (11/18/09)--The Credit Union National Association (CUNA) has urged lawmakers to support an amendment to H.R. 3996, the Financial Stability Improvement Act of 2009, offered by Rep. Brad Sherman (D-Calif.), which would, in effect,exclude all credit unions from contributing to a stabilization resolution fund for systemically risky institutions. H.R. 3996 would create a stabilization resolution fund, located at the Federal Deposit Insurance Corporation (FDIC), to cover the cost of resolving failing financial companies that are systemically important to the financial system. The National Credit Union Share Insurance Fund (NCUSIF) currently has similar authority with respect to insured credit unions. The stability bill, as currently written, would direct the Federal Deposit Insurance Corporation (FDIC) to assess financial companies, including credit unions, with over $10 billion in total assets to provide the initial funding for the new fund, and to replenish the fund in the future. Sherman’s bill would raise the current $10 billion-asset funding threshold to $75 billion, effectively exempting all credit unions. While the current $10 billion threshold removes all but three credit unions from the effects of the legislation, lifting the asset cap to $75 billion would protect Navy Federal FCU, Pentagon FCU and State Employees CU from the bill. In the letter, which was addressed to House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) and ranking member Rep. Spencer Bachus (R-Ala.), CUNA detailed several reasons that credit unions should be excluded from the legislation, including their member-owned, not-for-profit cooperative business plans. Credit unions “exist to provide financial services to their member-owners” and “by definition face a set of incentives that are very different from those confronting for-profit financial companies,” the letter added. While the Sherman amendment “would not provide for the complete exclusion of credit unions from the scope of this legislation,” it would address “significant credit union concerns,” CUNA added. Separately, National Credit Union Administration Chairman Debbie Matz sent a letter Tuesday to committee Chairman Barney Frank (D-Mass.) that expressed concerns shared by CUNA, saying it was not “equitable to require credit unions to participate in the resolution fund to be managed by FDIC.” While the costs of dealing with large-scale financial firm failures should not be born by the greater taxpaying public, Matz does not believe that credit unions should be included either. Credit unions pose little to no systemic risk to financial markets, as “even the failure of the largest credit union would have no systemic effect outside of the credit union industry,” the NCUA letter said. Matz also questioned the “advisability” of allowing a federal agency outside of the NCUA “to take supervisory action against credit unions.” Matz also thanked Frank for including the NCUA in the planned Financial Services Oversight Council, saying that the NCUA “looks forward to working cooperatively” within the council, which will “provide an excellent forum for interagency discussion and will be an effective mechanism to strengthen safety and soundness regulation.” As reported in The Hill, Rep. Ed Perlmutter (D-Colo.) may soon introduce a separate amendment that would give financial regulators increased authority over the actions of the Financial Accounting Standards Board (FASB), which is currently under the oversight of the Securities and Exchange Commission (SEC). CUNA would support Perlmutter's intent to give greater congressional oversight of accounting standards. Debate on H.R. 3996 is expected to continue this week, and it is not known when the bill could pass out of committee. For the CUNA letter, use the resource link.


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