WASHINGTON (6/17/13)--House Financial Services Committee Vice Chairman Gary Miller (R-Calif.) will soon unveil anticipated legislation that will open formal discussions in the U.S. House about possible regulatory relief measures for credit unions and community banks. The bill could be introduced as early as today.
 
Miller's bill will focus on credit unions and topics discussed within its section range from such things as enhancements to National Credit Union Administration authority in a few areas to improved capital standards for credit unions, to a cost-benefit analysis of rules, past and present.
 
"Credit unions wholeheartedly thank Rep. Miller for acting on their great need for regulatory relief so fewer resources are diverted from their true business of serving their members," said Sam Whitfield, Credit Union National Association vice president of legislative affairs. He added CUNA's appreciation that Miller included CUNA in the development of his legislation.
 
Miller's bill will join other CUNA-supported regulatory relief legislative initiatives already introduced in the House of Representatives, including:

• The Credit Union Small Business Jobs Creation Act (H.R. 688),  which would permit business lending credit unions to apply to NCUA for the authority to lend up to 27.5% of their assets to small business members;
• The Capital Access for Small Business and Jobs Act (H.R. 719), which would permit credit unions to accept supplemental forms of capital;
• The Financial Institutions Examination Fairness and Reform Act (H.R. 1553), which would bring fairness to the examination and examination appeals processes;
• The Community Lending Enhancement And Relief Act (H.R. 1750), which would exempt credit unions from several of the Dodd-Frank mandated mortgage rules, including new escrow rules; and,
• The Capital Access for Small Community Financial Institutions (H.R. 1862), which would permit privately insured credit unions to join a federal home loan bank.

 Miller's credit union bill will likely be joined by other regulatory relief legislative initiatives coming out of the financial services panel this year.
 
Other Financial Services Committee members are said to be preparing to offer bipartisan regulatory relief bills and are working to find for areas where credit union and community bank interests may intersect in a bill. CUNA has assured lawmakers that such areas exist; for instance, one such area is examination fairness legislation.
 
During a hearing in April, CUNA delivered a 35-point plan for credit union regulatory relief to federal lawmakers. Among changes promoted by CUNA are:

• Increasing National Credit Union Administration budget transparency;
• Adjusting the treatment of non-owner occupied one- to four-family dwelling loans for credit unions from business loans to residential real estate loans;
• Increasing the maturity limit for higher education loans made by federal credit unions; and,
• Expanding investment authority in credit union service organizations.

WASHINGTON (6/17/13)--A Bloomberg Business Week article cites the strong support credit unions provided small businesses during the Great Recession, and credited them with picking up the slack created as banks clamped down on credit to small business owners. But the article notes the statutory member business lending (MBL) cap is constraining credit unions' ability to keep lending.

The article warned that a new Biz2Credit Small Business Lending Index shows some decline in that activity by credit unions. The 12.25%-of-assets member business lending cap is one of the top reasons for this funding squeeze, Bloomberg noted. Bloomberg reported that credit unions are working hard to convince the U.S. Congress to ease the lending restrictions.
 
Also, Credit Union National Association Chief Economist Bill Hampel explained in the article that the Biz2Credit statistics are different than figures from the National Credit Union Administration, whose data for the first quarter of 2013 shows that credit unions made $3.9 billion in business loans early this year, an increase from the $3.1 billion total reported in the first quarter of 2012.
 
"A lot of small business lending is relationship-based and requires local knowledge," Hampel told Bloomberg. Biz2Credit's surveying method may not create an accurate representation of credit union loan application volume, he added.

CUNA continues to call on Congress to help credit unions and the economy at large by approving MBL cap increase legislation. U.S. House (H.R. 688) and Senate (S. 968) bills would increase the credit union MBL cap from 12.25% of assets to 27.5%. CUNA has estimated that lifting the MBL cap would create 140,000 jobs and inject $13 billion in new funds into the economy, at no cost to taxpayers and without increasing the size of government.
 
S. 968, which was introduced by Sen. Mark Udall (D-Colo.) in mid-May, currently has 15 co-sponsors. H.R. 688, introduced by Reps. Ed Royce (R-Calif.) and co-sponsor Carolyn McCarthy (D-N.Y.), has 102 co-sponsors.
 
More than 500 credit unions are at or quickly approaching the cap, accounting for approximately 60% of credit union business lending, CUNA President/CEO Bill Cheney noted in a letter to Congress early this month. "If the cap is not increased, the ability of these credit unions to continue to be there for their small business-owning members will be jeopardized," he added.

WASHINGTON (6/17/13)--Today kicks off National Small Business Week, a time proclaimed by the president each year for the last 50 to mark the importance of small businesses to the nation's economy. It is an ideal time, says Credit Union National Association Deputy General Counsel Mary Dunn, to highlight all that the country's credit unions do to support small businesses in their communities--and how much more they could do with improved policies.
 
"This is a good week to note that credit unions' member business lending (MBL) portfolios grew while banks' small business lending portfolios shrank during the past two decades and especially since the financial crisis that began in 2007-as documented by the U.S. Small Business Administration's (SBA) 2011 independent report 'The Increasing Importance of Credit Unions in Small Business Lending,'" Dunn notes.

"And, credit unions are willing to do even more if the U.S. Congress will pass bi-partisan legislation to increase the MBL cap to 27.5% of a well-capitalized credit unions assets--up from the current 12.25% cap," she says. CUNA estimates that lifting the MBL cap would create 140,000 jobs and inject $13 billion in new funds into the economy, at no cost to taxpayers.

Dunn adds that this week is also a good time to mention CUNA's ongoing review of SBA policies that have the unintended consequence of hindering credit union involvement in the agency's flagship 7(a) and 504 guaranteed lending programs.

"The cost and complexity of the application process to these good programs has been a stumbling block for some credit unions interested in this avenue for providing more credit to their small business members.

"CUNA continues to look for regulatory changes that would benefit credit unions and small businesses by making more credit available," Dunn notes.

MADISON (6/17/13)--A new paper from the Filene Research Institute addresses how credit unions can translate high member satisfaction scores into improved share of deposits.
 
Credit unions spend a great deal of time and money trying to improve member loyalty by measuring and managing metrics like satisfaction and Net Promoter Scores (NPSs), according to the paper, "Linking Member Satisfaction to Share of Deposits: Applying the Wallet Allocation Rule in CUs." As a result, credit unions have far higher satisfaction and Net Promoter levels than their retail banking competitors.
 
However, despite having consistently higher satisfaction and Net Promoter levels, credit unions hold a small percentage of total deposits relative to their retail banking competitors. Part of the reason for this is that metrics like satisfaction and Net Promoter correlate poorly with the share of deposits that members allocate among the financial institutions they use. This fact runs counter to what most credit union managers believe.
 
The paper introduces the Wallet Allocation Rule, which takes into account the credit union's rank among all the financial institutions the member uses. For example, if a credit union is one of only two financial institutions a member uses for a given purpose, the rule shows that the difference between being the first choice and being the second can have a major financial impact. In such a situation, even being tied has grave consequences: Half of each dollar the credit unions could be collecting from the member is going to a competitor.
 
To read the paper, use the link.

MADISON, Wis. (6/17/13)--A new white paper from the CUNA Lending Council examines how collateral risk management can be used in an environment in which few financial institutions have been immune to recent dramatic economic effects on loan portfolios and the collateral tied to them.
 
If a loan is secured by collateral--a home, a car or other personal assets--collateral risk is the chance of loss arising from errors in the nature, quantity, pricing or characteristics of that collateral.
 
This paper, "Collateral Risk: Insights on Loan Portfolio Monitoring and Management," focuses on the causes of collateral risk exposure, how macro- and microeconomic factors affect collateral risk, risks specific to certain loan types, proactively managing collateral risk, implementing systems, policies, and procedures, National Credit Union Administration requirements, data gathering, and bringing the conversation full circle with a discussion about member outreach.               
 
Contributing factors to collateral risk are more numerous than the types of collateral, the economic times, and the societal factors that change over time, the paper said. While collateral-risk exposure is most commonly associated with real estate, it noted, for any type of secured loan, managing collateral risk must occur at both the loan and portfolio levels.
 
The four main risk-collateral "channels" the report describes are:

• Lender selection--Lenders more often require observably riskier borrowers to pledge collateral to reduce after-the-fact frictions.

• Borrower selection--"Unobservably safer" borrowers tend to pledge collateral more often to signal their underlying quality.

• Risk shifting--Borrowers are encouraged to shift into safer investment projects when pledging collateral.

• Loss mitigation--Collateral reduces losses in the event of borrower default, as the lender is able to recover value from the pledged assets.

For all four, the report noted, the channel should be stronger when the observable economic characteristics of collateral are more desirable. For example, "borrower selection" should be stronger when the collateral is more desirable, because the "unobservably safest borrowers" are expected to choose the lowest loan rates and to pledge the most desired types of collateral.

WASHINGTON (6/17/13)--Credit Union National Association President/CEO Bill Cheney last week thanked two retiring league presidents--Dan Plauda of the Illinois Credit Union League and Sylvia Lyon of the Credit Union Association of New Mexico--for their "tremendous contributions not only to the credit union systems in their respective states, but to the credit union system as a whole." While acknowledging that the credit union system "may be turning a page," with these and similar announcements from long-time league leaders in Massachusetts/New Hampshire/Rhode Island, Pennsylvania, South Carolina, and Tennessee--it also heralds a new, exciting chapter to come, Cheney added.

Plauda will be retiring on June 30, 2014 after 37 years of service to the credit union movement, the ICUL announced last week. (See June 11 News Now story: Plauda To Exit Illinois League June 2014.)

Lyon's pending retirement was also announced last week. CUANM Board Chairman and Rio Grande CU President/CEO Chris Fitzgerald in a statement thanked the 20-year credit union veteran for her efforts, which led to great successes in the areas of governance, strategic positioning, political advocacy and philanthropic commitment.

"New league leaders have been making their mark, spearheading innovations in league advocacy and service. The American Association of Credit Union Leagues is closely studying the evolution to anticipate its own members' needs and stay ahead of the curve," Cheney said in this week's edition of The Cheney Report.

This week's Cheney Report also includes:

• Updates on tax and housing finance reform efforts;
• Positive press coverage for aSmarterChoice.org; and
• News on the Consumer Financial Protection Bureau's overdraft work.

Each Friday, The Cheney Report provides a valuable window into CUNA's actions on behalf of member credit unions and reinforces the value of CUNA membership.

To sign up for The Cheney Report, click the resource link below and use the "subscribe" tab on the right of the page.

Past issues of The Cheney Report are also archived on cuna.org.

MUSKEGO, Wis. (6/17/13)--Corporate Central CU in Muskego, Wis., held its annual meeting Thursday in Waukesha, Wis., and announced its board of directors.
 
With more than 70 members in attendance, Chairman Greg Hilbert and President/CEO Robert W. Fouch reported that 2012 was another exceptional year for Corporate Central. The Corporate was able to continue adding to retained earnings and building on the strength of a strong capital position that exceeds all regulatory requirements under the National Credit Union Administration  corporate credit union regulations.
 
"Your commitment and support have positioned us well for the future," Fouch told meeting attendees. "This means that we are able to focus our resources on serving you, developing new services, improving existing services, and welcoming new members as we continue to grow."
 
At the organization meeting held immediately after the annual meeting, the four board members comprising the Executive Committee were determined. They are:

• Chairman, Greg Hilbert--Fox Communities CU, Appleton, Wis.;
• Vice Chairman, Kim Sponem--Summit CU, Madison, Wis.;
• Secretary, Ronald Vogel--Fort Community CU, Fort Atkinson, Wis.; and
• Treasurer, James Schrimpf-- Brewery CU, Milwaukee.

During the business portion of the meeting, election results stated the time period in which nominations could be accepted had expired, and no additional candidates had been placed in nomination; therefore, Eric Chrisinger, Sponem and Tom Young were declared directors of Corporate Central CU.
 
Prior to the annual meeting, members also participated in two education sessions. Anthony Gibbs, regional director from the Consumer Financial Protection Bureau (CFPB) presented, "CFPB: Programs, Processes, and Priorities," which provided members with an overview of what regulations are coming into effect and how they will affect financial institutions--specifically credit unions.
 
Brian Knight, senior vice president and general counsel from the National Association of State Credit Union Supervisors, presented, "The Changing Regulatory Landscape: A National Perspective and Mid-Year Assessment," which provided attendees with a review of the first six months of regulatory activity, focusing on rule changes, guidance issues and examination issues from both a national perspective and across the states.

MADISON, Wis. (6/17/13)--Malcolm Gladwell, a keynoter at the Credit Union National Association's 2013 America's Credit Union Conference (ACUC), will do a first-time presentation on his new book at ACUC, the Credit Union National Association announced. ACUC will be held June 30-July 4 at the Hilton New York in New York City.
 
The New Yorker staff writer and author of four New York Times bestsellers, Gladwell is known for turning conventional wisdom on its head as he does in his soon-to-be-released book, "David vs. Goliath." 
 
Gladwell was interviewed for a feature article in Credit Union Magazine by Paul Gentile, executive vice president, strategic communications and engagement, at CUNA, which presents the conference.
 
Credit unions are David to the banks' Goliath, and credit unions should look to use their smaller size to their advantage in a financial services arena that is as unsettled as it ever has been, said author and reporter Gladwell.
 
"I am interested in the idea that a lot of our intuition about what is an advantage and what a disadvantage is are wrong--that we confuse those two things," Gladwell said. "We can make a list of things that help us or hurt us. I think the wrong things are on the list." 
 
Future success is not ensured by being more powerful in the marketplace, because bigger is not always better, Gladwell explained.
  
"True innovation comes from the marginal people who push innovation into the center," he concluded.

 In 2005, he was announced as one of Time's 100 most influential people. He is ranked No. 10 on The Thinkers 50 2011, and in 2007 he received the American Sociological Association's first Award for Excellence in the Reporting of Social Issues.