WASHINGTON (3/10/14)--The Credit Union National Association supports risk-based capital but has strong concerns that there's a multi-billion-dollar price tag of additional capital for credit unions attached to a proposed risk-based capital (RBC) rule. That is the wrong approach for a credit union system that withstood, under current rules, the worst financial crisis in 80 years, CUNA President/CEO Bill Cheney says in the most recent
The Cheney Report.
Cheney urges credit unions to comment on the National Credit Union Administration's risk-based plan, unveiled in January, and points to CUNA's increasing arsenal of resources for credit unions at
. The tools, including a March 19 webinar (see related story), are intended to help credit unions understand the impact of the proposal on their operations--today and into the future--and gear up to respond.
"CUNA absolutely supports risk-based capital for credit unions--that's our long-held position. But NCUA's proposal is not the right approach for our members, and the credit union system at large," Cheney writes, reiterating a point the group has made repeatedly.
For risk-based capital to be implemented correctly, CUNA asserts, it must be part of overall capital and prompt corrective action reform---changes that will require congressional action.
The reforms must include:
- Lower leverage ratios for well- and adequately capitalized credit unions; and,
- Authority for supplemental capital for federally insured credit unions that want to use it to meet capital ratio requirements.
Cheney says that the NCUA should be pursuing these legislative plans no less vigorously than it is pushing for its major RBC rule.
Furthermore, Cheney informs, CUNA strongly believes that updated risk-based capital requirements should be in relation to the adequately capitalized, statutorily defined as maintaining a 6% net worth ratio, and not to the well-capitalized level.
"Also, no rule should afford any greater authority for the agency to impose additional capital requirements on a case-by-case basis--and risk weightings must be properly calibrated," the CUNA leader writes.
See the resource links for information on the webinar and on the CUNA RBC resources for member credit unions.
WASHINGTON (3/10/14)--Can the National Credit Union Administration's risk-based capital proposal be fixed? Credit Union National Association experts and credit union CEOs will attempt to answer that and other credit union questions during a just-announced March 19 webinar.
The hourlong CUNA webinar, scheduled to begin at 3 p.m. (CT), will be introduced by CUNA President/CEO Bill Cheney. CUNA Chief Economist Bill Hampel and Deputy General Counsel Mary Dunn will detail the risk-based capital proposal and credit union concerns. Participants will also have the chance to hear directly from credit union CEOs about their perspectives on the proposed rule. A short question-and-answer session is planned to end the information session.
The risk-based capital proposal would restructure NCUA's current prompt corrective action regulation to include calculation of a capital-to-risk-assets ratio, analogous to Basel III for community banks. The risk weights would be substantially different, and the proposal would impose higher capital requirements for credit unions with higher concentrations of assets in real estate loans, member business loans, longer term investments and some other assets.
The proposal would apply to credit unions with assets of more than $50 million.
A final version of the rule is not likely to go into effect until 2016 or later. However, CUNA is encouraging credit unions to consider the proposal and its impact on their operations right now and submit their comments to the agency, CUNA and state leagues. Credit unions will also have a chance to take their thoughts on the issue directly to the NCUA during a trio of public town hall meetings this summer.
CUNA has posted a comprehensive, but concise, summary of the rule to help inform credit unions on the rule, and has also produced a Risk-Based Capital Action Center tool to help credit unions file comment letters with the agency. CUNA has also requested that the agency extend the comment deadline for this proposal by at least 90 days.
For more on the webinar and CUNA's other risk-based capital resources, use the links.
WASHINGTON (3/10/14)--Only the U.S. Congress can increase the 12.25%-of-assets credit union member business lending (MBL) cap, but there are a number of regulatory actions the National Credit Union Administration can and should take to aid credit unions approaching the cap, the Credit Union National Association said. CUNA detailed these Friday in letter to the agency leadership.
CUNA President/CEO Bill Cheney wrote, "On a number of occasions, CUNA has urged the agency to revisit its member business loan rule and since March 2012, we have repeatedly advocated that the agency update its regulatory provisions implementing the exemption for credit unions that have a history of primarily making member business loans.
"Since 2008, we have been advocating for other changes to the MBL rule, such as removing limitations that are not required by the statute."
Other steps suggested in letters sent to NCUA Chairman Debbie Matz and board members Michael Fryzel and Richard Metsger include:
- Updating Federal Credit Union Act definitions that provide exemptions from the MBL cap for credit unions that have a history of primarily making MBLs to their members;
- Expanding provisions addressing MBL loans made for the financing of one to four family dwellings; and
- Removing limitations that are not required by the statute.
The NCUA can take important steps to relieve regulatory burdens associated with MBLs without sacrificing safety and soundness, the top CUNA executive wrote.
CUNA urged the agency to proceed with these recommendations and to aid efforts to encourage the U.S. Congress to increase the cap.
MADISON, Wis. (3/10/14)--Christine Henzig, Wisconsin Credit Union League director of communications, explained why credit unions are the financial institution of choice for consumers in a recent interview on
WIBA-AM 1310's "
Ask the Experts" program.
The foundation of the credit union difference is a cooperative ownership structure, Henzig explained. "Unlike banks that are owned by shareholders--a small group of shareholders that are in it to earn profits--credit unions are owned by the depositors," Henzig said. "As a credit union member...you are the owner."
Because of that structure, any profits beyond required reserves, go back to members in the form of better pricing on financial services. "That's a great deal for consumers," she said.
Henzig said there's a common misperception that credit unions are hard to join. Although credit unions began with a common membership bond as a form of collateral protection, today they offer much broader terms of membership. "There are some restrictions as to which credit union you can join, but there's always going to be a credit union you can join," Henzig said.
She suggested consumers log on to aSmarterChoice.org to find a credit union that fits their needs. aSmarterChoice is the consumer website created by the Credit Union Natoinal Association and its affiliated state credit union associations., such as WCUL.
Credit unions offer typically the same services that banks do--checking, saving, auto loans, mortgages, small business loans, student loans and investment products---in addition to 30,000 no-fee ATMs through CO-OP ATM Network.
The credit union system is built on collaboration, Henzig said, adding,"Other financial institutions don't collaborate the way credit unions do. Because our depositors own us we want to do them a good turn. If we don't have the service at one credit union, we'll send them to another credit union, because we know they will get good service."
Wisconsin credit unions members saved $100 million in fees and better rates over banks in 2013, including $57 million in lower loan rates, and $24 million in lower and fewer fees.
"That's $100 to $200 a household," Henzig said. "That's pretty significant."
About 40% of Wisconsin residents--2.4 million consumers--are credit union members, Henzig said. In 2013, nine in 10 Wisconsin credit unions provided free checking, offered loans of $1,000 or less, and adjusted loan terms to help members facing financial hardship due to unemployment, furloughs or temporary job loss.
To listen to the entire interview, use the link.
BETHPAGE, N.Y. (3/10/14)--A credit union-sponsored survey taking the temperature of the small business climate in Long Island drummed up a bit of media attention this week.
Survey results, unveiled Thursday by Bethpage (N.Y.) FCU, with $5.4 billion in assets, were picked up by
and CBS' New York affiliate,
More than 600 Long Island small business executives--who oversee outfits with annual revenues of less than $10 million--were polled. Bethpage FCU's Business Banking Group worked with Stony Brook University's Center for Survey Research to conduct the poll (
Long Island Exchange
Subjects ranged from confidence levels in national political leaders to expectations for business growth in 2014.
Perhaps most notably, despite broad concern for the direction of the national economy, many business owners watched their operations expand and their sales build in 2013.
Among those queried, 36% said their businesses grew in 2013, compared with 26% in the year prior; 35% expect their businesses to grow over the next six months; and 41% predict that year-end 2013 sales will surpass that of 2012, which is a 10% improvement from the previous poll.
Only 12% of business executives, meanwhile, believed that government officials in the nation's capital would energize the national business climate this year, while 62% said they instead have confidence in Long Island business leaders.
CAMBRIDGE, Mass. (3/10/14)--For the third consecutive year, Harvard University Employees CU, Cambridge, Mass., offered Harvard undergraduates a financial literacy class designed to provide them with an understanding of personal financial management.
The optional class, called "Personal Financial Management," ran three days with a four-hour session each day. Students received a carefully targeted curriculum of consumer credit, credit scoring, personal budgeting, financial goal setting, planning, insurance, taxes, the financial marketplace and investing.
"Historically, it has primarily been the responsibility of parents to teach their children the basics of personal financial management," said Gene Foley, president/CEO of the $442 million-asset credit union. "The problem with that is the financial products now offered in the 21st century are not the same as the ones that parents grew up with."
The goal of the "survey course" curriculum was to present the knowledge most critical for undergraduates to understand and apply now in their personal financial life.
Less than 20% of college students receive any kind of formal personal financial education--a knowledge gap that leaves serious potential for financial missteps in college and beyond, according to Tom Murphy, the credit union's director of student services,
"Though most students have been using and managing money since before they were in kindergarten, a significant portion of their financial education has been self-taught," Murphy said. "We live in an increasingly complex financial world, and the better we prepare them now for that reality, the more successful they'll be when they come face-to-face with it."
The first day of the program provided students with the foundation to develop a solid financial plan. Using case studies, students reviewed the fundamentals for proper financial planning and use of credit.
The second day included a panel on investing with recent graduates from Harvard Business School (HBS), the College and Harvard Law School. The final day of the program covered wealth management, insurance and taxes.
WASHINGTON (3/10/14)--Compliance preparations for the National Credit Union Administration's new emergency liquidity rule must be complete by March 31, the Credit Union National Association reminds credit unions.
The liquidity rule sets up three-tiered emergency liquidity requirements for credit unions with less than $50 million in assets, between $50 million and $250 million in assets, and more than $250 million in assets.
The final rule contains asset-cap increases that were advocated by CUNA and will impact approximately 374 credit unions.
Federally insured credit unions (FICUs) with less than $50 million in assets must maintain a basic written emergency liquidity policy but will not be required to take further action. All FICUs with assets of $50 million or more are required to develop contingency funding plans describing how their credit union will address liquidity shortfalls in emergency situations. FICUs with assets of $250 million or more would be required to have access to a backup federal liquidity source for emergency situations.
The NCUA has said the rule is part of a global regulatory effort to promote sound liquidity-risk management. The rule will strengthen individual credit unions and, as a result, the entire system, the agency added.
The final rule does not include the Federal Home Loan Banks (FHLB) as an acceptable source of emergency liquidity, although eligible credit unions required to meet the federal source provisions would be free to borrow from a FHLB for nonemergency purposes. Without the FHLB, credit unions have two options to ensure a federal liquidity source for emergency situations: Becoming a member of the NCUA's Central Liquidity Facility (CLF) by subscribing to CLF stock or access to the Federal Reserve's discount window.
CUNA strongly supports the use of the home loan banks for liquidity.
SEATTLE (3/10/14)--Credit unions are known to cater services to their memberships. That's why it was no surprise when Verity CU, based out of bicycle-loving Seattle, rolled out a new loan program just for bike riders.
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But while Verity, with $422 million in assets, isn't the first credit union to offer a bicycle loan program, the way the organization advertised the new service in 2013 was perhaps unique.
Using the social media service CafeGive Social--a social marketing app company--Verity launched its loan campaign with a photo contest called "Roll On Seattle," which asked community members to send in snapshots of their favorite bikes.
The response was instantaneous, according to CafeGive's website. With a $250 gift card to the winner as an incentive to enter, Verity increased its number of Facebook "likes" by 68%.
That's 68% more people who learned the details of the loan program, which includes no payment for 90 days and loan amounts ranging from $500 to $7,500.
Verity also donated $5 for the first 100 entries to Bikeworks Seattle, a nonprofit that supports sustainability initiatives, bicycle education and safety.