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Inside Washington (01/17/2011)
* WASHINGTON (1/18/11)--The Credit Union National Association (CUNA) has issued an analysis of a final National Credit Union Administration (NCUA) rule that amends the federal regulator’s low-income rule, located in Section 701.34 of its regulations. The CUNA final rule analysis notes that the new rule clarifies the definition of “low-income members” to say that, when determining a credit union’s low-income designation, the comparison of credit union data (whether individual or family data) must use statistical data for the same category. More specifically, individual member data should be compared to individual median income data and not compared to median family income data. Another clarification in the new rule makes the regulatory text consistent with the geo-coding software the NCUA uses to determine whether to designate a credit union as low-income. The final rule is identical to an interim final rule adopted by the agency Aug. 5, and its provisions are effective as of that date … * WASHINGTON (1/18/11)--Whether government should take a role in jump-starting small-business lending—or if regulators have gotten in the way--was the focus of a Federal Deposit Insurance Corp. forum last Thursday. Regulatory officials maintained small-business credit could flow more freely with increased supervision and still-declining real estate values. They urged lenders to do more holistic underwriting, without relying on borrowers’ collateral values to make loan approvals. Federal Reserve Chairman Ben Bernanke stressed that the underwriting cannot rely on collateral for repayment until the real estate market improves, which may not happen for some time. In addition to Bernanke, the panel, which aired on CNBC, also included FDIC Chairman Sheila Bair, Sen. Mark Warner, D-Va., and Thomas Bell Jr., the chairman of the U.S. Chamber of Commerce. Panelists disagreed if a stricter regulatory environment, including the Dodd-Frank Act, was restricting small-business lending. Warner said regulators are sending mixed messages by asking lenders to be more cautious with their balance sheets while asking them to do more lending. Bair said the credit crisis was the result of excessive risk and a more cautious approach is a benefit to banks. The Credit Union National Association (CUNA) advocates an increase in the credit union member business lending cap as an important way to address the small business lending crunch. A cap increase to 27.5% of assets, up from the current 12.25%-of-assets limit, could infuse $10 billion of new credit into the nation's small businesses and add more than 100,000 jobs to a struggling jobs market. Both economic improvements would occur at no cost to the taxpayer … * WASHINGTON (1/18/11)--Saying the “pendulum had swung too far” in favor of regulatory micro-management Rep. Spencer Bachus (R-Ala.) Thursday said bank examiners should allow community bankers to lend more freely and spur small business job growth. Bachus made his remarks at an Federal Deposit Insurance Corp. conference on small business lending in his first official speech as chairman of the House Financial Services Committee. “During my conversation with employers, I am constantly told that one of the biggest obstacles they face right now is obtaining financing from banks,” Bachus said. “The search for sufficient capital is a struggle, even for companies with good credit histories and long-established relationships with local banks.” Credit unions also face challenges with examinations. The Credit Union National Association (CUNA) has just released extensive guidance on examination and supervision issues, as well as a Credit Union Bill of Rights. CUNA staunchly endorses strong, reasonable safety and soundness supervision, but also maintains that credit union officials must have the latitude they need to exercise business judgments and operate in the best interests of their members. (See related story:”CUNA unveils extensive guidance on CU exam issues”) … * WASHINGTON (1/18/11)--The Basel Committee today issued minimum requirements to ensure that all classes of capital instruments fully absorb losses at the point of non-viability before taxpayers are exposed to loss. The requirements were endorsed by the committee’s oversight body, the Group of Governors and Heads of Supervision, at its Jan. 10 meeting. During the financial crisis, a number of distressed banks were rescued by the public sector injecting funds in the form of common equity and other forms of Tier 1 capital. While this had the effect of supporting depositors, it also meant that Tier 2 capital instruments (mainly subordinated debt), and in some cases Tier 1 instruments, did not absorb losses incurred by certain large internationally active banks that would have failed had the public sector not provided support. Under the new rules an instrument must meet or exceed minimum requirements to be included as Tier 1 or Tier 2 capital. Instruments issued on or after Jan. 1, 2013, would be required to meet those requirements. Instruments issued before that date, but conforming to the criteria under Basel III, would be phased out starting Jan. 1, 2013 …


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