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NCUA Budget, Assessments, CUSO Rule Lead Nov. Meeting Agenda

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ALEXANDRIA, Va. (11/15/13)--The 2014 budget, overhead transfer rate, operating fee scale and projected share insurance and corporate assessments are all on the agenda for the National Credit Union Administration's Nov. 21 open board meeting. A final rule on credit union service organizations (CUSO) is also on the agenda.

The NCUA's original 2013 budget was set at $251.4 million, but the agency in July reduced its projected 2013 budget by $2.6 million. In a recent edition of the Credit Union National Association's "Inside Exchange" video series, NCUA Chairman Debbie Matz told CUNA's Paul Gentile that the agency's 2014 budget will contain some increases to address long-awaited pay raises for some employees. Funds will also be raised to retrain staff to implement new rules, regulations and benefits for credit unions, she said. (See Nov. 6 News Now: Matz Discusses Budget, CUSO Rule, Risk-based Cap With Gentile: Inside Exchange, Part II.)

There will be no National Credit Union Share Insurance Fund (NCUSIF) premium assessment in 2013. CUNA has also encouraged the NCUA to refrain from charging a Temporary Corporate Credit Union Stabilization Fund (TCCUSF) assessment this year. Instead, the agency should monitor how the economy in general and housing markets progress, CUNA suggested. A quarterly report on the status of the TCCUSF will also be presented during the board meeting.

As for the final CUSO rule: Under a proposed version of that rule released in 2011, CUSOs and their subsidiaries would be required to directly file their financial statements with the NCUA, and to forward those reports to state supervisors. The NCUA currently has the authority to inspect the financials and records of some CUSOs, but the majority of financial information on CUSOs is provided by natural person credit unions that obtain services from the CUSOs.

A final version of the rule was to be unveiled in June, but the NCUA postponed its release.

CUNA has said that while some CUSOs have had issues, CUSOs as a whole do not pose a systemic risk to the credit union system or overall concerns to the NCUSIF.

For more on the NCUA board meeting, use the resource link.

CUNA CompNOTES, Compliance Charts Provide New Reg Resources

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WASHINGTON (11/15/13)--As credit unions prepare for the Jan. 10 effective date for many of the new mortgage rules, credit unions continue to ask how they can most efficiently digest all of this new information. Two answers are offered by the Credit Union National Association's compliance staff: CUNA CompNOTES and Compliance Charts.

"It has been our experience working with so many credit unions and credit union leagues across the country that not all compliance people absorb compliance material the same way--particularly when we are faced with literally thousands of regulatory pages. For this reason, we are presenting the Consumer Financial Protection Bureau's mortgage rules, for compliance purposes, in a couple of formats--in a narrative form in CUNA's CompNOTES, as well as chart form," CUNA Federal Compliance Counsel Colleen Kelly said.

CUNA has broken up several of the new rules, such as mortgage servicing and loan origination, into smaller manageable topics.

CUNA's CompNOTES provide credit unions with not only the specific regulatory requirement for each area of the mortgage rules, but also the official CFPB interpretations and any helpful clarifications included in the summary information of the final rules.

CUNA's Compliance Charts include much of the same information, but in a non-narrative format. The charts also include more citations and are organized so that users can more readily track sections of the regulations.

To help credit unions access these resources quickly, CUNA has put together "CUNA's Catalogue of Mortgage Rules Compliance Resources," which features links to both CUNA's CompNOTES and Compliance Charts for all of the new rules. The catalogue also features links to CUNA's overview summary chart of the mortgage rules, which details what types of mortgages are covered by which regulations.

The catalogue also links to a lengthy compilation that lists all of CUNA's compliance resources to help credit unions master the mortgage lending requirements, broken down by the different regulations. This compilation not only includes the CompNOTES and charts, but also includes the many Credit Union Magazine articles, blog posts, Q&A documents, and eGuide details CUNA has available. There is also a link to the CFPB's resource page, and the bureau's small entity compliance guides.

For more, use the resource link.

Committee's Approval Of CU Trust Account Parity Is a Milestone

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WASHINGTON (11/15/13)--The House Financial Services Committee on Thursday approved legislation that would extend share insurance coverage to all of the underlying owners of funds held by lawyers in trust accounts and realtors in escrow accounts. The bill, known as the Credit Union Share Insurance Fund Parity Act (H.R. 3468), was approved by voice vote.

Thursday's approval of the share insurance legislation is a milestone: It marked the first time since 1998 that a stand-alone piece of pro-credit union legislation was passed through the committee. During the markup session, original co-sponsor Rep. Ed Royce (R-Calif.) noted CUNA's support of the bill and thanked committee Chairman Rep. Jeb Hensarling (R-Texas) and co-sponsors for their help in moving the bill forward.

Credit Union National Association Senior Vice President of Legislative Affairs Ryan Donovan said CUNA has encouraged Congress to address this issue since 2008. The issue is also part of CUNA's 35-point regulatory relief plan.

"We appreciate the bipartisan approach that this legislation was given. The committee and the bill's sponsors worked closely with us and with the National Credit Union Administration on the language, which helped facilitate passage of the bill," he added. "CUNA looks forward to the House considering the bill as soon as possible. We also hope that H.R. 3468 is the first of many regulatory relief bills to move through this committee," Donovan said.

Under the bill, National Credit Union Share Insurance Fund coverage would be provided for accounts such as Interest on Lawyers Trust Accounts (IOLTAs) so they are treated for deposit insurance purposes on the same basis as similar accounts insured by the Federal Deposit Insurance Corp. The bill would correct an NCUA interpretation of the Federal Credit Union Act that puts credit unions at a disadvantage. The NCUA has said that for full insurance coverage, all the clients must be members, rather than just the attorney establishing the account.

NCUA Webinar Covers Fraud Signs, Solutions

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ALEXANDRIA, Va. (11/15/13)--Why credit union employees commit fraud, and how proper supervision and strong internal controls can help fight fraud were discussed during a Thursday National Credit Union Administration webinar.

The webinar, titled "Deterring Employee Fraud," featured fraud detection and prevention tips from Joni Lovingood, a senior consultant with CUNA Mutual Group, and Scott Butterfield of Your Credit Union Partner. The webinar was hosted by NCUA Office of Small Credit Unions Initiatives Economic Development Specialist Lauren Bethea.

The median loss in financial institution fraud cases is $140,000, according to an Association of Certified Fraud Examiners report.

Any credit union employee, including vice presidents, managers, collectors, data processors, tellers, loan officers and accountants, can commit an act of financial fraud, Lovingood said. Signs to look out for in the event of potential fraud include employee attitude changes and lifestyle, and spending and borrowing changes.

Credit unions can also inadvertently aid fraudsters by having inactive supervisory committees and internal auditors, performing inadequate background checks and maintaining lax internal controls.

An inactive and/or poorly trained supervisory committee, a weak internal control culture, and poor follow up of past audit findings are among the common internal control weaknesses cited by Butterfield. To remedy these issues, Butterfield suggested credit unions can:
  • Establish clear expectations for the supervisory committee and clarify the committee's audit framework, policies, protocol and audit specifications;
  • Provide risk, control and compliance training; and
  • Create an audit calendar that includes review and reporting for past audit findings.
Accountability and a system of checks and balances also can defend credit unions against employee dishonesty, Lovingood said. Surprise cash audits, loan reviews and file maintenance report reviews are among other steps credit unions can take to detect instances of fraud. And, Lovingood noted, insurance should not be a substitute for effective internal controls. The cost of insuring predictable losses will usually be more than the cost of retaining them, she emphasized.

Other tips to avoid fraud included:
  • Comprehensive audits;
  • Dual control of vaults; and
  • Frequent cash counts.
Stated credit union fraud policies can set the tone for the entire organization. CUNA Mutual Group has a sample fraud policy that can be made available to its policyholders, Lovingood said.

Yellen Talks Reg Burden At Fed Confirmation Hearing

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WASHINGTON (11/15/13)--The Federal Reserve should continue to limit regulatory burdens for small financial institutions, taking into account their distinct role and contributions, Federal Reserve Board Chair nominee Janet Yellen said during a Thursday confirmation hearing.

Yellen made her remarks before the Senate Banking Committee.

She said the Fed could also work to level the playing field between large, too-big-to-fail institutions and smaller institutions. Yellen in later remarks also said the Fed needs a model for supervision of smaller institutions that's different and less onerous.

Sen. Pat Toomey (R-Pa.) during the hearing remarked that the regulatory compliance burden for institutions that pose no systemic risk is too large. Yellen told Toomey she would do something about this issue as Fed chair.

In other prepared remarks, the Fed nominee said she was "committed to using the Fed's supervisory and regulatory role to reduce the threat of another financial crisis." Capital and liquidity rules and strong supervision are important tools for addressing the problem of financial institutions that are regarded as too big to fail, she said.

Overall, the Federal Reserve has sharpened its focus on financial stability and is taking that goal into consideration when carrying out its responsibilities for monetary policy, Yellen said. "I support these developments and pledge, if confirmed, to continue them," she added. Yellen also pledged to make the Fed a more open and transparent institution during her potential tenure.

Other topics touched on during the hearing include:
  • Unemployment rates;
  • Quantitative easing and general fiscal policy; and
  • Basel III regulations.
Committee Chair Tim Johnson (D-S.D.) praised Yellen's "strong track record in evaluating trends in the economy," noting that she provided early warning that housing prices were creating a bubble, and was first on the Fed to recognize the recession of 2008. "Such accurate economic judgment would be a tremendous quality of a Fed chair...We need her expertise at the helm of the Fed as our nation continues to recover from the Great Recession, completes Wall Street Reform rulemakings, and continues to enhance the stability of our financial sector," Johnson said.