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NCUAs IG takes US Central examiners to task

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ALEXANDRIA, Va. (10/22/10)—National Credit Union Administration (NCUA) examiners should have recognized earlier than 2007 and 2008 the risk exposure that U.S. Central FCU’s “significant concentration” in mortgage-backed securities represented, according to a material loss review published by the agency’s Office of Inspector General. The reports was prepared by Crowe Horwath LLP. “Similar to U.S. Central management, prior to 2007, NCUA also placed significant emphasis on the high ratings assigned by the NRSRO on the purchased mortgage-backed securities, and failed to recognize U.S. Central’s exposure to significant concentration risk due to the lack of diversification in their investments,” the report said. The executive summary of the report identified its objectives were to: determine the cause(s) for U.S. Central’s conservatorship and the resulting loss to the National Credit Union Share Insurance Fund, assess supervision of the credit union, and make appropriate recommendations to prevent future losses. The report also discusses the actions of U.S. Central’s management and board of directors generally from 2007 to 2009. The entire OIG report can be found on the NCUA website.

NCUA 2011-2016 strategic plan adds goals

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ALEXANDRIA, Va. (10/22/10)—A commitment to diversity and greater recognition of the need for “clearly articulated and easily understood regulations” will be among the National Credit Union Administration’s (NCUA) strategic goals moving forward, the Agency said on Thursday. Those two goals will join the goals of effective, transparent regulation, promoting ensuring a safe credit union system, and ensuring credit union access for all as key tenets of the NCUA’s strategic plan for the years 2011 through 2016. The NCUA on Thursday said that the strategic plan will “help promote a stable recovery from the current recession” and will ensure that the credit union system “is thriving and self-sustaining for years to come.” The NCUA has also renewed its “commitment to public service, objectivity and independence” as part of the strategic plan. For more on the NCUA’s strategic plan, use the resource link.

Progress of NCUSIF education efforts noted

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ALEXANDRIA, Va. (10/22/10)—The National Credit Union Administration’s (NCUA) pro-credit union PR blitz is gaining traction in several markets, the NCUA noted during its Thursday monthly meeting. The NCUA has created video and radio ads that feature financial guru Suze Orman touting the similarities between the NCUA’s National Credit Union Share Insurance Fund (NCUSIF) and the account insurance provided by the Federal Deposit Insurance Corporation. The NCUA recently made the $250,000 account fund guarantee permanent. The video PSAs are expected to begin airing in on several broadcast and cable channels, including, potentially, NBC, CBS, and ION TV, in the coming weeks. The NCUA has also been been active in radio, print and online forums, including social media sites such as twitter and facebook. The NCUA noted steady gains in followers on both of those sites, and education-related materials have been seen by an estimated 12 million viewers online.

Merger database launch valuable for CUs CUNA

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ALEXANDRIA, Va. (10/22/10)—The Credit Union National Association (CUNA) on Thursday commended the National Credit Union Administration (NCUA)for launching its credit union merger partner registry, which was highlighted at the agency's Board meeting Thursday.
Click to view larger image The NCUA's merger registry site will allow credit unions to search for potential merger partners
The registry provides the names of potential credit union supervisory merger partners and allows interested credit unions to search for potential merger partners nationwide or limit the search to within certain states or counties. Searches may also be limited to within a certain radius of a given address. The registry was strongly recommended by the Credit Union National Association's Mergers Issues Working Group, chaired by Ohio Credit Union League President Paul Mercer. NCUA officials during the meeting said that the merger database would provide a “good starting point” for credit unions that wish to merge “but don’t know where to start.” NCUA Chairman Debbie Matz cautioned that not all merger database participants would be selected for mergers. The merger registry and the overall merger process will also be discussed in a pending NCUA letter to credit unions. The NCUA also reported on the status of troubled credit unions during its monthly insurance report. While many of the statistics were similar to those reported last month, the NCUA reported that the total number of CAMEL Code 4/5 credit unions increased by 14 and the number of CAMEL Code 3 credit unions increased by 16 since last month. However, NCUA Chief Financial Officer Mary Ann Woodson noted that one of the new CAMEL Code 3 credit unions was a former Code 4/5 credit union that improved its financial condition. Overall, just over 18% of total insured shares are held in CAMEL 3 credit unions, and 5% of those same shares are held in CAMEL 4/5 credit unions, Woodson added.

RegFlex takes a hit NGNs get a boost

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ALEXANDRIA, Va. (10/22/10)--The National Credit Union Administration (NCUA) on Thursday voted to assign a 0% risk weight to the NCUA Guaranteed Notes that securitize the cash flows on the legacy assets held by the conserved corporates and approved a final version of RegFlex provisions. The NGNs are being sold in a series of auctions on the open market. NCUA Chairman Debbie Matz said that the NCUA issued the low risk asset rule to help a greater number of credit unions participate in the NGN investment opportunity.
Click to view larger image NCUA board members disagree on whether to move ahead with a tightening of RegFlex rules, with Chairman Debbie Matz (center) gesturing to make a point that the agency must be "proactive" with the changes. The rule was approved with board member Michael Fryzel (left) also voting in favor, while board member Gigi Hyland (right) voted against it. (CUNA Photo).

3.7M-asset Texas CU becomes 16th 2010 liquidation

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ALEXANDRIA, Va.--Phil-Pet FCU, Pampa, Texas, became the 16th credit union liquidation of the year when the National Credit Union Administration (NCUA) liquidated the $37 million-asset credit union. The credit union was determined by the NCUA to be insolvent and the agency’s Asset Management Assistance Center will transfer share accounts to Pantex FCU of Borger, Texas. Pantex, a full-service credit union, also has branches in Pampa, as well as in Fritch. It has $216.8 million in assets and serves approximately 15,939 members in the Texas Panhandle. Phil-Pet, chartered in 1940, served 765 members. It is the 26th credit union failute of the year. There have been 132 bank failures in 2010.

Inside Washington (10/21/2010)

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* WASHINGTON (10/22/10)--The Federal Reserve Board released a study Oct. 19 outlining eight recommendations regulators should use as they jointly draft risk-retention regulations over the next six months. (American Banker Oct. 21). The new rules would require lenders to retain some risk before selling loans into the secondary market. The recommendations included: considering the potential effect of risk retention on smaller institutions, weighing the different asset classes and securitization structures, and considering the relevant accounting treatment and regulatory requirements as they apply to retention. The study noted that the Fed believes the risk-retention rules should be flexible and that regulators should not enact one-size-fits-all rules that cover all asset classes that fall under the new Dodd-Frank Act restrictions. The Federal Reserve Board and the Federal Deposit Insurance Corp. will hold a two-day symposium on Oct. 25 and Oct. 26 on mortgages and the future of housing finance... * WASHINGTON (10/22/10)--Housing and Urban Development Secretary Shaun Donovan announced that a four-month review by his department has found "significant differences" in the performance of servicers, but not enough for foreclosure errors to be considered a "systemic" issue, said American Banker (Oct. 21). “We will follow up vigilantly on the potential noncompliance that we have found, and I want to be clear that we will demand that servicers take actions as required by FHA to do everything they can to keep borrowers in their homes,” Donovan said… * WASHINGTON (10/22/10)--In light of the beating the Deposit Insurance Fund took during the financial crisis, the Federal Deposit Insurance Corp. (FDIC) plans to raise its target ratio of reserves to insured deposits to 2%, 65 basis points above the statutory minimum. ( American Banker Oct. 20.). The move was designed to ensure that the fund does not go broke again if another banking crisis arises. FDIC officials said the fund would not reach the 2% threshold until 2027, at the earliest, based on projected assessment rates… *WASHINGTON (10/22/10)--In the Federal Deposit Insurance Corp. (FDIC) assessment plan released on Oct. 19, the agency canceled a planned to raise premiums by three basis points in 2011, noting that the U.S. Congress had allowed it more time to rebuild the battered fund and projected losses from bank failures had dropped, said American Banker (Oct.20). FDIC officials said they will seek to reduce over time the 12 to 16 basis points most banks now pay and settle at a small, steady premium…