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News Now: July 11, 2014

CUs dig deep on RBC plan at Chicago Listening Session

CHICAGO (7/11/14)--The room was packed and the concerns were earnest at the National Credit Union Administration's Listening Session in Chicago Thursday. As expected, the primary topic of the day was the NCUA's proposed risk-based capital rule. NCUA board member Michael Fryzel helped open the meeting by reminding the more than 160 people in attendance that the current RBC rule is just a proposal, and that when it comes to changes, "everything is on the table."

"We want a rule that provides safety and soundness without unduly limiting credit union operations," he said.

NCUA Chair Debbie Matz said both the Office of the Inspector General and the Government Accountability Office have pushed the NCUA to get an RBC system in place.  "We are going forward with risk-based capital, but we will address the issues that have been identified," she said.

After initial remarks by the regulators, credit union attendees--sitting at round tables--were asked to identify by group what their primary concerns are.

Several credit union representatives requested a re-issue and new comment period for the proposal, since a number of significant changes are likely.  In response, Matz said that if after the NCUA reviews the proposed rule, if the rule's intent changes significantly it will require a new comment period. She also the 18-month implementation period for the new rule will likely be changed. A longer implementation period is one of CUNA's requests if the NCUA goes forward with a final rule.

Another credit union remarked that there would be a greater benefit if examiners were better trained than imposing an "unnecessary" new RBC rule. The NCUA responded by saying that a lot of resources go to examiner training, but the effectiveness is limited because of high rates of turnover.  The agency also invited credit unions' ideas on how to improve examiner training.

Several credit unions raised issues with the risk weights, particularly those that would be applied to member business loans, mortgages, and longer term investments.  One expressed concern that his credit union's members might be misled into believing his credit union was more risky than a bank with the same balance sheet because the bank's risk-based capital ratio would be higher under Basel rules than under NCUA's proposal. 

It was also a credit union concern that the RBC rule was trying to create a "no-risk-allowed system," which would devalue the credit union charter option.

A credit union with a significant business lending activity pointed out that applying higher risk weights to greater concentrations of MBLs ignored the wide diversity that can exist in a business loan portfolio.  NCUA Director of Examination and Insurance Larry Fazio said there was no way to make the RBC rule as precise as some credit unions have requested. He added that there will be more risk weight analytics available for credit union review in the final version of the rule.

Fazio also told the credit union crowd that the more robust the RBC system is, the more comfortable will examiners be with net worth ratios not substantially above 7%.

NCUA Chair Debbie Matz stated during the back-and-forth discussion that the agency has no intention to eliminate the separate 10.5% risk-based capital requirement for a credit union to be well capitalized.   The Credit Union National Association and other critics of the current RBC proposal have argued that the Federal Credit Union Act prohibits the NCUA from setting a higher capital requirement for well-capitalized credit unions than for those that are deemed adequately capitalized.

Other topics addressed at the session included fines for late Call Report filers and interest rate risk. Matz said the number of late filers is going down, but the NCUA has been too lenient in the past. She added that if there is a valid excuse for late filing, the credit union in question will not be penalized.

Matz also addressed the issue of interest rate risk. She said the NCUA went through the first quarter call reports to identify credit unions with more than $1 billion in assets, and while some had adequate interest rate risk, "there is still some work to do."

She followed that up by saying that the NCUA is focused primarily on credit unions that are large enough to pose risks that are too high.

Recordings of the session will be posted on the CUNA website when available. The NCUA's third and final Listening Session of the year will be July 17 in Alexandria, Va.

CUNA to drive home need for reg relief at House hearing

WASHINGTON (7/11/14)--The Credit Union National Association has asked Ohio credit union CEO Doug Fecher to speak for the credit union movement on regulatory relief before Congress Tuesday.

Fecher, president/CEO of Wright-Patt CU in Beavercreek, Ohio, with $2.8 billion in assets, will testify before the House Financial Services Committee's subcommittee on financial institutions and consumer credit at a hearing titled "Examining Regulatory Relief Proposal for Community Financial Institutions."

Fecher will address regulatory burden and its effect on credit unions. He will address topics such as the Federal Reserve's Regulation D, which places limits on pre-authorized withdrawals and transfers, risk-based capital, the Credit Union Residential Loan Parity Act, Consumer Financial Protection Bureau examination thresholds and more.

CUNA has testified more than a dozen times in the past three years on regulatory relief matters, and Fecher has testified on behalf of CUNA multiple times. The hearing is scheduled to start at 2 p.m. (ET).

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Housing fin. reform must ensure CU access to markets: CUNA

WASHINGTON (7/11/14)--Credit Union National Association interim President/CEO Bill Hampel wrote to three U.S. representatives Wednesday asking for consideration for credit unions during the housing finance reform process.

The letter is addressed to Reps. John Delaney (D-Md.), John Carney (D-Del.) and James Himes (D-Conn.), sponsors of the Partnership to Improve Homeownership Act (H.R. 5055), which was introduced Thursday.

The bill would establish an insurance program through Ginnie Mae. All government-guaranteed, single-family and multi-family mortgage-backed securities would be supported by a minimum of 5% private sector capital, standing in a first-loss position. The remaining 95% of the risk would be shared equally between Ginnie Mae and a private reinsurer.

It would also wind down Fannie Mae and Freddie Mac, revoking their charter but allowing them to be sold and recapitalized as entities with different business plans without any of their current unique powers.

In CUNA's letter, Hampel thanks the congressmen for their support of housing finance reform, and praises their act for continuing the dialogue that will lead to the future mortgage finance system.

"As we have said throughout the housing finance reform debate, any legislation to reform the secondary mortgage market should ensure that credit unions have equal access to a well-regulated and well-capitalized secondary market, and should preserve the ability of borrowers to get mortgage products with predictable payments, like the 30-year fixed rate mortgage," Hampel's letter reads. "The new system should be durable enough to withstand economic distress and the transition to the new system should be reasonable and orderly."

Use the resource link below for the full text of the bill.

Ways and Means' Marchant, Sen. Banking's Heller voice RBC plan concerns

WASHINGTON (7/11/14)--New voices from both the House Ways and Means Committee and the Senate Banking Committee have joined the chorus of concerns regarding the National Credit Union Administration's proposed risk-based capital (RBC) plan. Republicans Rep. Kenny Marchant (Texas) and Sen. Dean Heller (Nev.) sent letters to the agency July 10 .
Ways and Means' Marchant asked the NCUA to:
  • Identify the statutory authority upon which the agency is relying to impose a higher risk-based capital requirement on well-capitalized credit unions;
  • Explain why the NCUA is attempting to regulate concentration and interest-rate risk thorough the addition on new capital requirements as opposed to relying on NCUA examiners to monitor risks of individual credit unions;
  • Identify the statute that gives the NCUA any authority to impose individual capital requirements on credit unions; and
  • Explain why 18 months, as proposed, is an adequate implementation time.
Senate Banking's Heller warns in his letter that the risk weights in the proposed rule may be "unduly burdensome" and could "reduce the availability or affordability of loan products and restrict credit" available through credit unions.
Heller added that credit unions in his state have warned him that the RBC plan, as written, will force a change in how they operate and require more time spent on regulatory compliance at a cost to helping the state's "struggling economy."
Other members of the Senate Banking Committee who have weighed in with concerns include its chairman, Sen. Tim Johnson (D-S.D.); its ranking member, Sen. Mike Crapo (R-Idaho); and Sen. Heidi Heitkamp (D-N.D.). From House Ways and Means, Rep. Erick Paulsen (R-Minn.) also has warned that credit unions in his state would be adversely affected by the NCUA's RBC proposal.
(See related story: NCUA gets more specific on RBC plan review at Chicago Listening Session.)

CU growth buoys hiring, pay increase plans: CUNA survey

CU System
MADISON, Wis. (7/11/14)--Burgeoning membership expansion and the potential for double-digit loan growth are incubating a stronger employment environment at credit unions--one that portends more hires and increased wages, according to research from the Credit Union National Association.
In the soon-to-be released 2014-2015 CUNA Staff Salary Report, nearly 30% of credit unions plan to add full-time employees to their payrolls in 2014--an increase from overall figures of 25% in 2013 and 20% in 2012.
In credit unions with $200 million or more in assets, a full 60% plan to expand their employee numbers this year.
"With credit union operating results in the aggregate, and by most means, back to pre-recession levels, credit unions are healthier than they have been in years," CUNA interim Chief Economist Mike Schenk told News Now .
Between trends of double-digit loan growth and 2.5% annual membership growth, "it's a pretty good indication that there would be a need for additional people and resources to serve new members," Schenk added.
On average, credit unions plan to add 3.9 full-time employees. That number rises with asset size, hitting 37 expected additions for credit unions with assets of $3 billion or more.
Part-time employees also play a part in 2014, with almost a quarter of credit unions planning to add part-time workers and an average 2.1 staff members. Fewer than 10% of credit unions plan to reduce full- or part-time staff, and the vast majority of those planning to make reductions are eliminating just one position.
This is the third year that nearly three-quarters of credit unions with $1 million or more in assets have plans for wage or salary increases. "As the job environment improves, credit unions will be paying more to keep their top-performing employees," said Jon Haller, CUNA director of market and corporate research.
Both actual increases and anticipated increases are somewhat more likely to be found among credit unions with assets of $20 million or more than among their smaller counterparts.
About 70% to 80% of credit unions provided salary/wage increases to each of the three following employee categories: CEO, management employees and non-management employees.
Similar percentages of credit unions anticipate providing such increases to each of these groups this year and in 2015.
Wage growth also is supported by a reduction in pay freezes, Haller noted. "Only 17% anticipate any wage freezes this year, a significant drop from the 2010 and 2011 high of 45% and the slide to 35% in 2012 and 2013," he said.
Those expected wage freezes are more likely to be encountered at credit unions with less than $20 million assets.
As credit unions look to a changing leadership demographic, 10% of CEOs--including about 25% to 35% who are currently age 60 or older--plan to retire in the next two years. Seventy-five percent of credit unions with CEO retirements on the horizon have succession plans in place.
The survey features compensation data for 90 positions, including CEO and 10 part-time positions. Data includes:
  • Base salaries;
  • Incentives;
  • Bonuses;
  • Total cash compensation;
  • Salary ranges; and
  • Asset categories for $1 billion to $3 billion, and more than $3 billion.

Global study finds 1 in 6 U.S. students financially illiterate

CU System
PARIS (7/11/14)--In a recent international study that looked at the financial capabilities of 15-year-olds, U.S. teenagers scored below average in financial literacy, and roughly 17.8% of American students were found to be financially illiterate, meaning they failed to complete even the most basic of tasks.

"This group of students can, at best, recognize the difference between needs and wants, make simple decisions about everyday spending, recognize the purpose of everyday financial documents, such as an invoice, and apply single and basic numerical operations," found the Organisation of Economic and Development, which administered the international assessment.

About 29,000 15-year-olds from 13 countries participated in the test, which gauged knowledge and financial skills such as reading and comprehending a bank statement, calculating the long-term cost of a loan or understanding how insurance works.

Americans scored just below the mean score of the 13 countries. The average score was 500, and U.S. teenagers averaged a 492.

Those from Shanghai-China posted the highest average score in financial literacy, above 600, with Belgium, Estonia, Australia, New Zealand, the Czech Republic and Poland behind them, though only 1 out of 10 students were able to handle complex financial situations across the board, including in the United States.

Students with bank accounts scored higher than those without them, the study found. In the United States, about 50% of 15-year-olds reported having bank accounts and in general performed better than those who didn't.

Other factors that influenced performance were:
  • Gender;
  • Wealth;
  • Cultural possessions and number of books at home;
  • Parents' highest occupational status and level of education;
  • Immigration status; and
  • School location.

IBEW Local 816 FCU closes

ALEXANDRIA, Va. (7/11/14)--The National Credit Union Administration announced late Thursday that it has liquidated IBEW Local 816 FCU, Paducah, Ky., after determining the credit union was insolvent and had no prospect for restoring viable operations.
The $6.3 million-asset credit union served 929 members. It is the sixth federally insured credit union liquidation in 2014.
The NCUA's Asset Management and Assistance Center will issue correspondence in the near future to individuals holding verified share accounts in the credit union. Members with additional questions about their insurance coverage may contact the center toll-free at 800-715-0777 between 8 a.m. and 5 p.m. (CT) Monday through Friday.
Member deposits are federally insured by the National Credit Union Share Insurance Fund. Administered by NCUA, the Share Insurance Fund insures individual accounts up to $250,000, and a member's interest in all joint accounts combined is insured up to $250,000. The fund separately protects IRA and Keogh retirement accounts up to $250,000 and has the backing of the full faith and credit of the United States.

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CUNA Councils reaches milestone of 6,000 total members

CU System
MADISON, Wis. (7/11/14)--The Credit Union National Association's nationwide organization for credit union executives--CUNA Councils--has reached the 6,000-member milestone.
"That's 6,000 credit union leaders collaborating and sharing insights, and 6,000 credit union leaders working together to drive the movement forward," said Jill Tomalin, CUNA executive vice president/chief operating officer. "If you're not already a Council member, connecting with this ever-growing community of credit union peers is something that will benefit you both professionally and personally."
Members have access to cooperative peer resources and experienced advice through the CFO Council; HR/TD Council; Lending Council; Marketing and Business Development Council; Operations, Sales and Service Council; and Technology Council.
The celebration and nationwide prize giveaway runs through Aug. 29. There are six ways to enter and six prizes, including a grand prize valued at up to $2,670. In the spirit of paying it forward, for each new member who joins by Aug. 29, the Councils will donate $6 to the National Credit Union Foundation.
Use the resource links for more information about CUNA Councils and to join the 6,000-member celebration.
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