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Washington Archive

Washington

Corporate CUs urge amended fair market definition

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WASHINGTON (10/10/08)—Corporate credit unions, some of which hold large portfolios of agency and non-agency residential mortgage-backed securities, yesterday urged the Federal Accounting Standards Board (FASB) to amend the definition of fair value for held-to-maturity (HTM) and available-for-sale (AFS) securities to the net realizable value of these securities. The Association of Corporate Credit Unions (ACCU) advocated the position in a comment letter filed yesterday. ACCU said the amended definition “is necessary in order to place investors in debt securities on equal footing with entities that hold loan portfolios for investment.” “We believe that securitized loans should not be treated differently than unsecuritized loans when the intent and ability to hold the investments is present in both cases,” said ACCU. “At a minimum, FASB should allow the current severe liquidity risk premiums to be adjusted in the determination of fair value to levels observed during periods of normal market activity.” ACCU maintained that financial instruments classified as trading securities should continue to be carried at liquidation--or exit--prices. “Using net realizable value provides a better definition of fair value and a more meaningful measurement of the true economic condition of an entity with regards to its HTM and AFS securities,” said ACCU.

Fair value accounting guidance not enough says CUNA

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WASHINGTON (10/10/08)—The Credit Union National Association (CUNA) yesterday said proposed accounting guidance does not go far enough in addressing key issues used to determine the fair value for certain assets where there is an ability and intent to hold until recovery or maturity. CUNA voiced its concern via comment letter on the Financial Accounting Standards Board's (FASB) Proposed Staff Position FAS 157-d, which offers guidance on using FASB Statement No. 157, Fair Value Measurements, in a market that is not active. The letter was developed under the auspices of CUNA’s Accounting Task Force, led by Scott Waite, senior vice president and chief financial officer at Patelco CU in San Francisco. CUNA, in its letter authored by CUNA Deputy General Counsel Mary Dunn, said FASB’s proposed guidance “raises questions regarding how it should be applied, and we are not certain how useful it will be. We also believe that more direction should be provided for the use of risk-adjusted premiums and discounts.” CUNA pointed out that parts of the proposed guidance does not go far enough to “address the concern that many have raised that an asset that can be held to maturity should not be marked to current market prices.” CUNA also urged a one-week extension to the comment period, which FASB held open for four days--from Oct. 6-9. The Emergency Economic Stabilization Act enacted last week, among other things, authorizes the Securities and Exchange Commission to suspend the mark-to-market standards and to evaluate that application. CUNA said it believed FASB’s guidance appeared to be an effort on the part of FASB to “provide an alternative to the suspension of the FASB Statement 157.” “While we think that appropriate comprehensive guidance can be useful and may be the answer, we also believe that the SEC should still proceed with its evaluation of the fair value standards under the new Emergency Economic Stabilization Act as expeditiously as possible,” wrote CUNA. Use the resource link below to access CUNA’s complete letter.

Hood CUs are healthy can help

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ALEXANDRIA, Va. 10/10/08)—Credit unions can move forward with “confidence in the financial health, transparency, and integrity of the credit union system” to be part of the solution to the unprecedented challenges in today’s financial marketplace, said National Credit Union Administration (NCUA) Vice Chairman Rodney Hood recently. “I am calling on credit unions to be a part of the solution. Being part of the solution requires confidence from your member owners, your management teams, and from your boards,” Hood said during remarks to the CU Credit Association of New York’s annual meeting in Niagara Falls. Hood noted strategic steps NCUA is taking to preserve confidence in the nation’s credit union system. They include:
* An NCUA advertising campaign assuring credit union members that their shares are federally insured. The NCUA also has established a call center devoted to fielding questions about share insurance; * Working for credit union inclusion in the recently enacted Emergency Economic Stabilization Act; and * Attention to proactive risk management through a new risk-focused examination.
Regarding examinations, Hood said the NCUA has eliminated the camel matrix and has developed a new exam which focuses on seven areas of risk; credit, interest rate, liquidity, strategic, transaction, compliance, and reputation. “The overall goal of the Risk Focused Exam is not to play ‘gotcha’, but rather, it is designed to be a collaborative and consultative process,” said Hood.

NCUA to vote on underserved powers and more

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ALEXANDRIA, Va. (10/10/08)—There are four items on the Oct. 16 National Credit Union Administration (NCUA) open board meeting agenda, including a quarterly report on the National Credit Union Share Insurance Fund. The three-member board is also scheduled to vote on a proposed rule that would set requirements for the use of the official insurance sign. Also on the table, a final rule that would affect three categories of incidental powers: correspondent services; operational programs; and finder activities. The NCUA will decide whether to approve additional illustrations of permissible activities within each of these categories. The board is also slated to consider a plan intended to clarify the procedure for establishing that an "undeserved area" qualifies as a local community, address the application of economic distress criteria; and clarify requirements for showing an area has "significant unmet needs," including the use of data from NCUA and other agencies to analyze whether an area is "undeserved by other depository institutions." In a recent comment letter, the Credit Union National Association (CUNA) urged the NCUA not to proceed with its underserved proposal, which CUNA said would establish a much more cumbersome procedure to approve underserved areas. CUNA maintained that the underlying rationale for the proposal is flawed and argued that the rule is not in need of “updating.” If adopted, the proposal would result in fewer and smaller underserved areas being approved, CUNA warned. CUNA urged the NCUA to retain the current process for approving underserved areas.

Inside Washington (10/09/2008)

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* WASHINGTON (10/10/09)—Rep. Barney Frank (D-Mass.), who heads the House Financial Services Committee, sent a letter to some of the nation’s largest mortgage lenders and servicers urging them to work to avoid initiating foreclosure proceedings by helping troubled borrowers to restructure their loans. He said a recent plan announced by Bank of America Corp. should serve as a model for the kind of action other lenders should take. This week, Bank of America Corp. announced intentions for “mass modifications” of troubled mortgages from lending giant Countrywide Financial Corp., which it took over earlier this year. (American Banker Oct. 9)… * WASHINGTON (10/10/08)--The Treasury Department may take ownership in many U.S. banks to restore faith in the nation’s financial system (The New York Times Oct. 8). The $700 billion bailout bill, passed last week by the House and the Senate, affords the Treasury the authority to put liquidity into banks at institutions’ request. Doing so could strengthen banks’ balance sheets and encourage them to lend, officials said ... * WASHINGTON (10/10/08)--Deposits at banks and thrifts were at $7 trillion, according to summary of deposits data released by the Federal Deposit Insurance Corp. Wednesday. The summary listed the deposits for the period ending June 30. Commercial bank deposits were at $5.9 trillion. Savings institutions deposits were listed at $1.13 trillion ... * WASHINGTON (10/10/08)--Firms are signing up: Vanguard Group Inc., T. Rowe Price Group and Fidelity Investments said they plan to sign up for the Treasury Department’s program to guarantee money market funds (American Banker Oct. 9). The temporary program was set up by the Treasury Department to restore faith in money market funds. The program will insure money market holdings below $1 ...