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CUNA-CFA to predict 2010 holiday spending

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WASHINGTON (11/19/10)--The Credit Union National Association (CUNA) and the Consumer Federation of America (CFA) on Monday will join for the 11th time to deliver the latest look at consumers’ holiday spending plans. CUNA Senior Economist Mike Schenk and CFA Executive Director Stephen Brobeck will present the CUNA/CFA survey, which was compiled in early November. The survey asks for the first time whether consumers feel their financial situation has gotten better or worse compared to a year ago, and provides fresh findings on consumer attitudes toward their financial condition and holiday spending plans. It also documents changes in consumer attitudes toward spending compared to the last several years as the economy strives to recover from the most severe recession in decades. The survey will be released at 10 a.m. ET in the National Press Club’s Zenger Room.

NCUA ups 2011 budget by 25 million

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ALEXANDRIA, Va. (11/19/10)--The National Credit Union Administration (NCUA) on Thursday approved a $25 million increase for its 2011 budget, and said that $750,000 will be dedicated to bolster examination and supervisory programs. The total budget for 2011 will be just over $225 million, 12% larger than the budget approved for 2010. The NCUA said that the increase is partly to cover adding 78 staff positions, and spending $7 million to cover a net growth of 5.7% in pay and benefits. However, nearly half of the budget increase will go to program additions and changes.
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The NCUA board also approved an overhead transfer rate increase from 57.2% to 58.9%. Additionally, the agency voted to increase the asset level dividing points for the natural person federal credit union operating fee scale by 3.4% and to decrease the natural person federal credit union operating fee rates by 2.86%. Credit Union National Association (CUNA) President/CEO Bill Cheney said that CUNA is concerned that the “agency is asking for more resources from credit unions at a time when so many credit unions are feeling the pain of an obstinate recession,” adding that CUNA will review the proposed increase “carefully” and will “seek more answers from the NCUA.” A total of $750,000 of the budget will be provided to the Office of Examination and Insurance “to continue an operational review of the agency-wide examination and supervision program,” the NCUA said. The NCUA’s Office of Inspector General will receive nearly $1 million to continue its work on material loss reviews of failed credit unions and conduct independent financial audits of the NCUA’s books. Nearly $3.5 million of the funds will go to the NCUA’s annual exemption program, which will add 53 examiners and six supervisory examiners to various NCUA regional offices. Doing so will allow the NCUA to increase its scheduled in-house visits to troubled credit unions to once every three months. NCUA Chairman Debbie Matz noted that the NCUA’s increased emphasis on credit union examinations leads to “safer” credit unions, and said that she hoped that the increased exams would ultimately lead to lower credit union assessments in the future. For the NCUA releases, use the resource links.

Inside Washington (11/18/2010)

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* WASHINGTON (11/19/10)--Sheila Bair will focus on bank resolution rules and capital requirements in the seven months remaining before her five-year term as chairman of the Federal Deposit Insurance Corp. ends June 26, 2011. In comments made during an interview and a public appearance, Bair said her priority will be putting rules in place to address the resolution of large financial institutions, including how claims are processed and operations are untangled (American Banker Nov. 18 and Nov. 17). Bair also said regulators must strengthen bank capital requirements to ensure that U.S. lenders can compete with international firms. Bair was on the committee that drafted the Basel III global agreement to raise both the amount of capital required and the standards for defining capital. Bair has refused to consider continuing at the FDIC or heading the Consumer Financial Protection Bureau. After she leaves office, Bair is considering writing a book that would provide an insider’s account of the 2008 financial crisis and examine factors that could prompt the next banking crisis … * WASHINGTON (11/19/10)--The Federal Reserve Board issued guidance requiring the nation’s 19 largest banks to submit capital plans that must gain Federal Reserve approval before the banks can raise dividends or buy back shares. The 19 banks must use the plans to prove they can continue operations and withstand losses even under “adverse” conditions (American Banker Nov. 18). Key criteria include the ability to meet Basel III capital requirements and absorb losses based on models that predict how a bank would perform in specific scenarios, including widespread economic challenges. The banks must also show how they will repay U.S. government funding, if applicable, before increasing dividends. The 19 banks covered by the guidance were subject to stress tests in 2009 … * WASHINGTON (11/19/10)--Rep. Melissa Bean, D-Ill., contradicted rumors of an appointment to head the Consumer Financial Protection Bureau at a press conference where she conceded her seat in Congress to election opponent Joe Walsh, a Republican. A moderate who has served on the House Financial Services Committee, Bean said she did not think she would be appointed to lead the consumer agency (American Banker Nov. 18). When this week’s counting of provisional and absentee votes was completed, Bean lost to Walsh by 290 votes in a wealthy district that leans toward Republicans. Bean served three terms in the House of Representatives …

Corp. CU rate shopping to be limited by NCUA amendment

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ALEXANDRIA, Va. (11/19/10)--The National Credit Union Administration (NCUA) has proposed limiting credit union membership in corporates to one corporate at a time and changing some internal control and reporting requirements via technical amendments to its corporate credit union rules. The corporate amendments, which, if approved, would also require corporate credit unions to establish enterprise-wide risk management committees and to record all votes by directors in official board minutes, were unanimously approved by the board on Thursday. The NCUA also proposed implementing "voluntary" Temporary Corporate Credit Union Stabilization Fund (TCCUSF) assessments to privately-insured credit unions and non-credit unions, such as credit union leagues, which are members of a corporate.
Click to view larger image NCUA board member Gigi Hyland (front right) discusses the potentially negative impact that limiting credit unions to a single corporate credit union could have on the credit union system during the NCUA's Thursday open board meeting. (CUNA Photo)
Credit Union National Association (CUNA) President/CEO Bill Cheney said that the proposed corporate CU membership requirements and proposed voluntary TCCUSF assessments for non-federally insured entities are areas that “are in need of careful review by credit unions and the agency.” The corporate credit union membership limit is an attempt to protect against “rate shopping” and “unnecessary competition between corporates.” In a draft of the proposed rule, the NCUA said that rate shopping “resulted in increased competition and, in some cases, led to unsafe investment activities as corporates sought higher investment yields to subsidize share dividends and service costs.” Credit unions may belong to two corporates for the short period of time that they are transitioning between corporates. Credit unions will be prohibited from “making any investment, including a share or deposit account, a loan, or a capital investment” in a corporate of which it is not a member. Credit unions that are currently members of two or more credit unions will not be required to give up their membership in those credit unions, however. Though NCUA board member Gigi Hyland approved the proposed rule, she added that she was concerned by the rule’s potential to limit credit union choice. Hyland also said that she is interested in receiving comments on the issue of only being able to belong to one corporate and welcomed suggestions of any alternative approaches that may also be able to address the agency's concerns. The NCUA would promote the “equitable sharing” of TCCUSF expenses among all members of corporate credit unions by requesting that existing non-federally insured credit unions (FICU) “make voluntary payments to the TCCUSF” by paying “an amount calculated as a percentage of the non-FICU member’s previous year-end assets.” Corporates would hold member votes on whether or not to expel non-FICUs that decline to make requested payments or that make payments “in an amount less than requested.” The NCUA has also added some slight technical changes to portions of the original corporate rule that addressed executive compensation disclosures, corporate credit union auditing and reporting requirements, and management’s reports on various corporate credit union activities. Specifically, the NCUA is seeking greater detail regarding affiliate transactions, legal lending limits, loans made to insiders, restrictions on capital and share dividends, and regulatory reporting. All of the NCUA’s proposed changes will have a 30-day comment period, and board members said that they were looking forward to receiving credit union input on the proposed changes. The proposal, if approved, would possibly become effective as soon as end of January. For the full NCUA proposal, use the resource link.

James to head new NCUA Office of Minority and Women

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ALEXANDRIA, Va. (11/19/10)—When the National Credit Union Administration’s (NCUA’s) newly formed Office of Minority and Women Inclusion (OMWI) opens on Jan. 21, it will be longtime NCUA employee Tawana Y. James standing at the helm. James has more than 30 years of service with NCUA and has served as director of the agency’s Office of Small Credit Union Initiatives, regional director, deputy executive director, deputy director of the Office of Examination and Insurance, and Associate Regional Director of Operations. The OMWI, according to NCUA, is being developed in response to requirements in the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law in July. As OMWI director, James will oversee that law’s requirements related to diversity in management, employment, and business activities, including:
* Equal employment opportunity and the racial, ethnic, and gender diversity of the work force and senior management of the agency; * Increased participation of minority-owned and women-owned businesses in the programs and contracts of the agency, including standards for coordinating technical assistance to such businesses; * Assessment of the diversity policies and practices of entities regulated by the agency; and * Preservation of credit unions run by minorities and/or serving minorities.

Projected corporate fund assessment a concern CUNA

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ALEXANDRIA, Va. (11/19/10)--While the National Credit Union Administration’s (NCUA) proposed National Credit Union Share Insurance Fund (NCUSIF) assessment of 0 to 10 basis points “is right within the range” that the Credit Union National Association (CUNA) expected, CUNA President/CEO Bill Cheney said that CUNA is “troubled with the projected corporate stabilization assessment.” The NCUA projected total dual assessments of 20-35 basis points (bp) for 2011. Staff estimated that growing losses at both corporate and natural person credit unions could require an NCUSIF assessment ranging from zero to 10 bp and a Temporary Corporate Credit Union Stabilization Fund assessment of 20-25 bp, bringing the estimated total assessment to 20 to 35 bp. These assessments could collect up to $2.7 billion in funds. NCUA Chairman Debbie Matz noted that the current basis point projection is only an estimate, and could shift due to increases or decreases in the number of credit union failures or CAMEL Code troubled credit unions. However, Cheney said, CUNA is particularly concerned with what appears to be "frontloading" of 20-25 bp. “The whole purpose of the corporate stabilization fund, as enacted by Congress, was to spread the expense to credit unions over an extended period of time. Further, the ‘legacy assets’ resolution plan, unveiled by NCUA in September, had as a central tenet a repayment by credit unions spread over 11 years, divided somewhat equally over that period,” Cheney said. The NCUA proposal, which was released at Thursday’s open board meeting, “almost defeats the purpose of spreading the cost over 11 years,” the CUNA leader added. CUNA has suggested that the NCUA alter its plan by allowing for the pre-payment of assessments over several years. Specifically, Cheney said, the NCUA could still assess 20 to 25 bp to meet liquidity needs, while only charging 9 bp in the following years. “This is a cash flow issue, which can be dealt with by pre-paid assessments as opposed to full assessments charged in one year,” Cheney said. Reporting on the status of its NCUSIF, the NCUA noted that the percentage of total assets held by CAMEL Code 4 and 5 credit unions seems to have leveled off at around 5%. The percentage of assets held by CAMEL Code 3 credit unions also remained somewhat steadily, with a percentage in the high teens (17%). The number of troubled CAMEL Code 4 and 5 and Code 3 credit unions rose by 4 and 5, respectively, between September and October, NCUA staff added.