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Senate panel to hold State of CU hearing next week

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WASHINGTON (12/1/10)--The Senate Banking Committee late Tuesday announced it will hold a “State of the Credit Union Industry” hearing Dec. 7 at which National Credit Union Administration (NCUA)Chairman Debbie Matz will be the sole witness. It has been years since the U.S. Congress has staged a credit union industry oversight hearing and this session is likely to probe the general health of natural-person credit unions, as well as the state of corporate credit unions and the NCUA’s actions to restore liquidity. In the NCUA's assessment, the chairman will give a broad overview of the financial condition of the industry and NCUA's regulatory and supervisory efforts to keep credit unions safe, sound and continuing to serve consumers. The hearing is scheduled for 2:30 p.m. (ET) and will be followed directly by a hearing on the nomination of Joseph A. Smith, Jr., of North Carolina, to be director of the Federal Housing Finance Agency.

NCUA underscores importance of CU tax status

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ALEXANDRIA, Va. (12/1/10)—The head of the National Credit Union Administration (NCUA) underscored the importance of the existing tax status of federal credit unions, saying its loss would have a “tangible and negative effect” on the safety and soundness of credit unions. NCUA Chairman Debbie Matz, in a Nov. 22 letter, was responding to a communication from Credit Union National Association (CUNA) President/CEO Bill Cheney regarding a recent report by the National Commission on Fiscal Responsibility regarding possible changes in the country’s tax code. The Commission’s draft report on deficit reduction options named tax expenditures as one way that the country's debt could be cut. While this could conceivably bring about debate on the credit union tax exemption, credit unions are not specifically cited in the report. In her letter, Matz said as chief regulator of federal credit unions her concerns about any repeal of the federal tax exemption extend also to the very existence of credit unions as they are known today. “Not only would there be a tangible and negative effect on the safety and soundness of credit unions, but I also believe such a change would necessitate a significant re-examination of the not-for-profit cooperative business model currently employed by credit unions,” Matz wrote. While deeply concerned about the commission’s tax report, CUNA has emphasized that the suggestions contained within its report are in the very earliest stages of recommendation and have a long road ahead before any are made policy. The commission released its recommendations today and is expected to vote on them on Friday.

NCUA NGN sales net 13.1M in funds

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ALEXANDRIA, Va. (12/1/10)--The National Credit Union Administration’s (NCUA) sale of NCUA Guaranteed Notes (NGNs) has netted $13.1 billion since October. The NCUA completed the second and third offerings in the series in November. The first of the two November offerings featured a Class A1 offering of $613.2 million in notes which paid a fixed-rate coupon of 1.6% yearly. A Class A2 offering of $1.361 billion in notes, paying 2.9%, and a Class A-PT offering of $1.786 billion in notes, paying 2.65%, were also put on the market last month. A second November transaction featured $2.62 billion in Senior I-A notes and $2.862 billion in Senior II-A notes that were backed by floating rate securities. The notes will pay 0.37% and 0.47% annually, respectively, and are subject to yearly maximum note interest rate caps of 7%. The NCUA settled its initial offering of notes in late October. The NGNs are comprised of $35 billion of distressed assets that were conserved from failed and conserved corporate credit unions, and are fully backed by the U.S. Government. The NCUA has amended its definition of low-risk assets to allow credit unions to invest in NGNs. For the full NCUA release, use the resource link.

Tough oversight could have blunted NCUSIF impact

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ALEXANDRIA, Va. (12/1/10)--The National Credit Union Administration’s (NCUA) Office of the Inspector General (OIG) has found that more aggressive NCUA supervisory actions could have helped the NCUA avoid the failure of nine credit unions and prevented the National Credit Union Share Insurance Fund from taking on substantial losses. The report focuses on significant findings from 10 of the NCUA OIG’s material loss reviews that were completed between November of 2008 and this October. The actions of the 10 individual credit unions reviewed, which included poor strategic planning and oversight, as well as outright fraud, “greatly contributed” to the failures, the OIG noted. The OIG identified examiner deficiencies in quality control efforts in the NCUA’s supervision of New London Security CU, High Desert FCU, and St. Paul Croatian FCU. The OIG also found that the NCUA used inadequate examination procedures during its inspections of these credit unions, as well as its inspections of Huron River Area CU, Center Valley FCU, Cal State 9 CU, Eastern Florida Financial CU, Clearstar Financial CU, and Ensign FCU. The report noted that the NCUA specifically failed to adequately monitor many lending programs and internal controls related to investment activity, and allowed fraud to continue to take place by ignoring several red flags that were present at some of the listed credit unions. Going forward, the OIG has recommended changes to the way that some CAMEL Code ratings are assigned and documented, and has suggested that the NCUA place a greater emphasis on Call Report monitoring. The NCUA should also emphasize the importance of reviewing asset concentrations, credit unions’ due diligence practices over new programs, services and third-party relationships, the OIG added. The report also encouraged the NCUA to review its requirements and levels that trigger quality control reviews, to provide national guidelines for the quality control process, and to require supervisory examiners to provide written response to the results of quality control review on any recommendations made by the quality control review. The NCUA agreed with the majority of the OIG’s recommendations, and said that it has either already implemented measures or is working on measures that would address some of the cited deficiencies. For the full NCUA OIG report, use the resource link.

Corp CU comment deadline extended

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ALEXANDRIA, Va. (12/1/10)--The due date for comments on the National Credit Union Administration’s (NCUA) recently proposed amendments to its corporate credit union rules has been extended until Jan. 28. Credit Union National Association (CUNA) President/CEO Bill Cheney said that CUNA appreciates the NCUA's "responsiveness to the needs of the credit union movement for more time to fully evaluate this important proposal." The NCUA originally provided credit unions and other concerned parties with a 30 day comment window. CUNA last week urged the NCUA to extend the comment period, saying that many aspects of the proposal "are in need of careful review by credit unions and the agency." The NCUA's corporate changes, which were proposed during the agency's November open meeting, would limit credit union membership in corporates to one corporate at a time and change some internal control and reporting requirements via technical amendments. The NCUA at that time 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. NCUA Chairman Debbie Matz said that the extended comment period “will balance the need for stakeholders to provide thoughtful feedback on the complex issues raised in our newly proposed corporate rule, while ensuring that the final provisions from both corporate rulemakings will take effect over a closely coordinated time frame. The end result will be a corporate system that is better positioned to manage risks and safely serve member credit unions,” Matz added. The NCUA has recently said that it welcomes comments on the proposals, and has specifically solicited input on any alternative approaches that may also be able to address the agency's concerns. For the full NCUA release, and the NCUA’s recent corporate credit union proposal, use the resource links.

Inside Washington (11/30/2010)

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* WASHINGTON (12/1/10)--The Federal Deposit Insurance Corp., saying it understands more about the relationship between big banks and risk after the recent financial crisis, will revise the formula it uses to calculate risk-based premiums, American Banker Nov. 30. The agency will add new factors to the calculation, including the level of concentration of higher-risk assets and a bank’s ratio of core to total funding. The FDIC’s existing assessment formula is based on the 2006 deposit insurance reform law. For most banks, the formula includes performance ratios to calculate the rate. For large banks, other factors, such as debt ratings, also are included. The FDIC first issued changes to the assessment plan in April. The latest revisions were released Nov. 9 to conform with changes brought about by the Dodd-Frank regulatory law … * WASHINGTON (12/1/10)--The U.S. Office of Financial Research (OFR), which was established improve data gathering within financial markets, is seeking to create a universal method for identifying financial firms and transactions Reuters Nov. 30. In a submission posted in the Federal Register on Tuesday, the OFR says it will invite comments on the “desired characteristics for a Legal Entity Identifier,” similar to bank routing numbers, that would make it easier to track transactions. OFR said no universal standard exists for identifying legal entities that take part in financial markets, which creates transaction failures and settlement issues. OFR was established earlier this year by the Dodd-Frank regulatory act and is currently located within the U.S. Treasury Department under the supervision of Lewis Alexander, a counselor to Treasury Secretary Timothy Geithner … * ALEXANDRIA, Va. (12/1/10)—The closed portion of the National Credit Union Adminstration’s (NCUA) December meeting has been moved from Dec. 16 to Dec. 17, the NCUA said on Tuesday. The open meeting remain s on its original date of Nov. 16. The NCUA also moved the closed portion of last month’s meeting to a separate date. Busy schedules have forced the NCUA to juggle dates and times of its meetings in recent months. The agency has traditionally held its closed meetings immediately after its open meetings …