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Inside Washington (01/13/2011)

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* WASHINGTON (1/14/11)--The January 2011 NCUA Report newsletter features the new financial literacy provisions for federal credit union directors, National Credit Union Administration Board actions taken at the December meeting. It also includes articles on contingency fund planning, managing mobile banking risk, and how credit unions fare in mortgage delinquency trends. NCUA Board member articles address understanding the regulators role, restricting vendor information, and the recent "Game Change." The complete document is available online here … * WASHINGTON (1/14/11)--The first indication of how regulators will interpret the Dodd-Frank Act comes next week when the Financial Stability Oversight Council outlines enforcement of the Volcker Rule, which bans proprietary trading and puts limits on risky investments (American Banker Jan. 13). Along with mandating the Volcker Rule, the act created the council, and gave it six months to define how proprietary trading should be reined in. Among the challenges are the different perspectives of its 15 members, who represent every area of financial services from banking to securities to insurance. If the council makes a relaxed interpretation of Volcker Rule, observers also expect it will take the same approach on its other primary mandate: deciding which nonbanks are systemically important. Companies determined to be systemically important will be held to the same oversight and rules as the largest banks, including when to inform the government and how they should be restored if they face financial challenges … * WASHINGTON (1/14/11)--Timed for tax season, the U.S. Department of the Treasury has launched a pilot to offer taxpayers a safe, convenient and low-cost financial account for the electronic delivery of their federal tax refunds. The new account card option provides everyday money-saving conveniences and consumer protection features for Americans with limited or no access to traditional banking services. As the next step in this pilot, Treasury will mail letters next week to 600,000 low- and moderate-income individuals nationwide. The letters will invite these taxpayers to consider activating a MyAccountCard Visa Prepaid Debit Card in time to have their 2010 federal tax refund direct deposited to the card. Compared with paper checks, direct deposit provides a safer, faster and more convenient way to receive a federal tax refund and other regular income, said the Treasury. Melissa Koide, policy director for the Chicago-based Center for Financial Services Innovation, lauded the move by the Treasury. “It bolsters the credibility of a quickly maturing market already well versed in serving low-income consumers. The pilot is an excellent start to bringing low cost transaction and savings products to millions of tax filers” …

Truth-in-Savings changes finalized by NCUA

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ALEXANDRIA, Va. (1/14/11)--The National Credit Union Administration (NCUA) on Thursday finalized a rule that requires credit unions to disclose overdraft and returned item (NSF) fees on their members' periodic statements. Under the rule, fees for both the statement period and for the year-to-date must be included on the disclosures. These and other changes to Regulation DD, the Truth in Savings Act, took effect on Jan. 1. NCUA staff during discussion of the rule noted that a trio of entities, one of which was the Credit Union National Association, recommended that the NCUA allow credit unions to refer to overdraft fees on periodic statements as "Total Overdraft Fees for Paid Items" instead of "Total Overdraft Fees." In an August 2010 comment letter, CUNA said that doing so would further distinguish paid overdraft items from items that are returned unpaid and that are also required to be disclosed. However, the final rule was unchanged from the NCUA’s earlier proposal. NCUA staff cited a desire to remain consistent with the Federal Reserve’s standards. The interim final rule also addressed disclosures for balance information and sweep accounts that are established to facilitate compliance with monthly limitations on savings accounts under Regulation D. The agency also approved interpretive ruling and policy statement (IRPS) 11-1, an interim policy statement that would add denials of technical assistance grant reimbursements to the set of issues that may be appealed during a credit union’s challenge of material supervisory determinations that are made by NCUA staff. These material supervisory determinations are currently limited to CAMEL ratings of 3, 4 or 5, adequacy of loan loss reserve provisions, loan classifications, and revocations of RegFlex authority for federal credit unions.

NCUA approves 2011 annual performance budget

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ALEXANDRIA, Va. (1/14/11)--Reducing losses to the National Credit Union Share Insurance Fund (NCUSIF) and improving the capital levels of corporate credit unions are among the National Credit Union Administration’s (NCUA) high priority goals for 2011, the agency said on Thursday. The NCUA on Thursday released its 2011 Annual Performance Budget, a document that addresses the NCUA’s objectives for the upcoming year. While the agency uses the budget to determine whether or not it has met its performance goals, it does not track the financial status of these objectives in the document. Annual performance budgets are released on a yearly basis and the goals set in the budgets are tracked on a quarterly basis. The NCUA may also be required to occasionally report to the Office of Management and Budget, NCUA staff added. Other goals outlined in the budget include fully staffing the NCUA’s Office of the Chief Economist and Office of Consumer Protection, helping low-income and other credit unions to access services, developing a transparent and effective regulatory environment with easily understood regulations, and increasing its own examination staff. The NCUA in its budget also said that it would establish its Office of Minority and Women Inclusion during 2011. The agency last year said that this office would be operational by Jan. 21. Responding to the release of the budget, the Credit Union National Association said that it would do all that it can to hold the NCUA to the performance goals regarding improving the regulatory environment and will continue to raise serious concerns about recently approved staff increases. The NCUA late last year voted to increase its 2011 budget by $25 million, and said that $750,000 of that increase would be dedicated to bolster examination and supervisory programs.

Sen. Mike Crapo joins 2011 GAC lineup

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WASHINGTON (1/14/11)--Sen. Mike Crapo (R-Idaho) will join congressional colleagues Reps.Spencer Bachus (R-Ala.), Barney Frank (D-Mass.), and Debbie Wasserman Schultz (D-Fla.),a nd Steve Stivers (R-Ohio), as a speaker at the Credit Union National Association's (CUNA) 2011 Governmental Affairs Conference (GAC). Crapo is a member of the Senate Banking Committee and has commended the Idaho Credit Union League and credit unions for their efforts to advance financial literacy in Idaho. Consumer Financial Protection Bureau architect Elizabeth Warren and co-authors of The New York Times No. 1 best-seller "Game Change" Mark Halperin and John Heilemann are also scheduled to speak during the GAC. The GAC will also feature keynote speeches from actor and Children's Miracle Network Hospitals co-founder John Schneider and "Miracle on the Hudson" pilot Captain Chesley B. "Sully" Sullenberger III. The GAC will open on Sunday Feb. 27 with a performance by classic rockers Three Dog Night. Additional speakers from Capitol Hill and the regulatory agencies will be announced in coming weeks. To register for this year's GAC, use the resource link.

NCUSIF reserve balance surpasses 1.26B

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ALEXANDRIA, Va. (1/14/11)--The National Credit Union Share Insurance Fund’s (NCUSIF) reserve balance currently stands at over $1.26 billion after the National Credit Union Administration (NCUA) last month transferred $54.8 million from the NCUSIF to its reserves as an insurance loss expense. Charges to the NCUSIF’s reserves related to natural person credit union failures totaled $7.8 million during the same month. The NCUA recognized a total of $317.2 million in those charges during 2010. The NCUSIF’s equity ratio declined from 1.29% in November to 1.28% as of the end of December, and NCUA staff noted that the 1.28% ratio’s calculation includes funds related to the NCUSIF capitalization deposit that have not yet been collected by the agency. Combined, insured shares in CAMEL 3, 4, and 5 credit unions represented 23.18% of insured shares during December, NCUA staff reported. The NCUA’s staff reported that there are currently 368 CAMEL 4 and 5 credit unions, representing just over 5% of the amount of total insured shares in the credit union system. The percentage of shares held in CAMEL 4 and 5 credit unions peaked at 6.2% in May. There are currently 1,827 CAMEL 3 credit unions, representing 18.1% of total insured shares, NCUA staff said. The agency reported 1,668 CAMEL 3 credit unions in December of 2009 and 1,792 in November of 2010.