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CUNA keeps push on for sound legacy asset approach

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WASHINGTON (12/2/09)--The Credit Union National Association (CUNA) continues to push the National Credit Union Administration (NCUA) for a reasonable approach regarding possible recoveries on corporate credit union legacy assets, encouraging the NCUA in a Dec. 1 letter to develop an approach that addresses legacy assets and also allows capital holders to benefit if confirmed losses are below estimates. In the letter to NCUA Chairman Debbie Matz, CUNA President/CEO Dan Mica said that it is “unfair to require credit unions to irretrievably write down their capital” in corporate credit unions “on the basis of the agency’s estimates of future losses, with no avenues of future recovery should those estimates prove to be overstated.” The NCUA in its letter No. 09-CU-10 stated that NCUA corporate rules support the depletion of corporate capital. While CUNA is aware that the NCUA is “dealing with a range of difficult issues,” Mica said that “how NCUA ultimately decides this issue will have ramifications of the utmost significance for corporate as well as natural person credit unions.” CUNA also aired concerns over legacy assets at an NCUA meeting on capital depletion held in early November, and NCUA Chairman Debbie Matz responded, saying that a successful solution would hinge on whether or not current holders of depleted capital accounts can legally retain some form of rights to any future earnings on corporates' "legacy assets." Matz said that it was “unlikely that earnings or losses from legacy assets can be isolated or set aside in ongoing corporates. Nor can corporates' depleted capital be frozen in a way that would preserve the integrity of their capital going forward." "However," Matz added, the NCUA is “exploring creative ideas to address legacy assets as well as to allow affected capital holders to benefit if confirmed losses are less than recognized losses. Any such alternative approach must be consistent with all legal and accounting requirements, and uphold the fundamental purpose of capital." For the full letter, use the resource link.

New UIGEA date doesnt erase problems CUNA

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WASHINGTON (12/2/09)--While last week’s announcement that the Federal Reserve and the U.S. Department of Treasury would push back the compliance date for the Unlawful Internet Gambling Enforcement Act (UIGEA) until June 1, 2010, is a positive development, the Credit Union National Association (CUNA) continues to work for more substantive changes to the bill. Portions of the UIGEA would require credit unions and other financial institutions to establish and implement policies and procedures to identify and block restricted Internet gambling transactions, or rely on those procedures established by the payments system. CUNA has warned that the postponement does not mean that credit unions should postpone moving ahead with compliance efforts in the hope that the UIGEA requirements will be delayed further or eliminated. According to the Federal Register, the effective date of the final rule remains Jan. 19, 2009. Frank also earlier this year introduced a second bill, H.R. 2267, the Internet Gambling Regulation, Consumer Protection and Enforcement Act, which would allow Internet gambling companies to accept bets from persons in the United States if they are licensed by the U.S. Treasury Department and maintain effective protections against underage and compulsive gambling and money laundering and fraud. It is believed that Frank favors passage of H.R. 2267 over any additional changes to UIGEA. While CUNA is neutral on the legality of internet gambling, CUNA has warned that aspects of UIGEA are difficult, if not impossible, to implement, and has said that an increased policing role, as demanded by UGIEA, could interfere with financial institutions' fundamental business to provide financial services to their communities.

Fed sets overdraft protection audio conference

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WASHINGTON (12/2/09)--The Federal Reserve Board will discuss its recently enacted final rules on overdraft protections during its "Outlook Live" Audio Conference, which is scheduled for Dec. 10 from 1 until 2 p.m. ET. The Fed rules, which will come into effect on July 1, would require credit unions and other financial institutions to obtain consent from consumers before they could be charged overdraft fees for ATM and one-time debit transactions and also require credit unions and other financial institutions to fully disclose the overdraft services, the fees, and the consumer's right to opt-in to the overdraft program. Federal Reserve Managing Counsel David Stein and Attorney Dana Miller will detail compliance issues and respond to audience questions during the conference. The Fed said it plans to hold additional audio conferences on consumer compliance issues. While legislation that could address overdraft fees remains active in both the House and Senate, the Credit Union National Association has said that a regulatory approach to these issues is far preferable than legislative initiatives. To register for the audio conference, use the resource link.

CU comment sought on BSA rule

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WASHINGTON (12/2/09)—The Financial Crime Enforcement Network (FinCEN) is amending Bank Secrecy Act (BSA) information-sharing rules to expand the list of parties allowed to submit 314(a) requests for information to financial institutions and the Credit Union National Association (CUNA) is seeking credit union comment on the plan. FinCEN has proposed to allow certain foreign law enforcement agencies, as well as state and local law enforcement agencies, to submit information requests to credit unions and other financial institutions. The proposed rule also clarifies that FinCEN, on its own behalf and on behalf of other appropriate U.S. Departmentof Treasury components, may submit information requests to financial institutions. Under the current rule, FinCEN may require U.S. financial institutions to search their records to determine if they have maintained or conducted a transaction with a person that a federal law enforcement agency has certified is engaging in money laundering or terrorist activity. The proposed new rule seeks to broaden access to the information-sharing program beyond federal law enforcement agencies because, FinCEN maintains, it has resulted in significant investigative benefits in major money laundering and terrorist financing cases. CUNA requests comment by Dec. 7; comments are due to FinCEN by Dec. 16. Use the resource link below to read the complete CUNA comment call.

Inside Washington (12/01/2009)

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* WASHINGTON (12/2/09)--Revised language of a House bill expected to be approved Wednesday by the Financial Services Committee would allow the Federal Deposit Insurance Corp. (FDIC) to lend to a failing company to unwind it. Originally, House committee Chairman Barney Frank (D-Mass.) proposed giving the FDIC authority to help failing companies without closing them, and to act as a receiver for companies compromising the financial system. However, amendments approved Nov. 18-19 have curbed the FDIC’s powers to help keep a company afloat (American Banker Dec. 1). Financial industry critics said the House amendment would allow the FDIC to create a debt guarantee program. The legislation has loopholes allowing “regulators to pay off creditors,” said Peter Wallison, American Enterprise Institute fellow. However, John Douglas, former FDIC counsel, said it’s difficult for the FDIC to offer liquidity guarantees. It has been reluctant to use “systemic exceptions.” The Senate Banking Committee is expected to adopt a similar measure. The Senate legislation does not contain provisions on FDIC assistance, but sources expect that Chairman Christopher Dodd (D-Conn.) will change his bill to match the House version ... * WASHINGTON (12/2/09)--The Federal Reserve Board plans to sell securities into financial markets soon through reverse repurchase agreements. The sales will test the central bank’s ability to absorb extra cash (American Banker Dec. 1). The transactions are expected to be small, with no material impact on market rates or availability of reserves, said the Fed. The tests are “advanced planning” and do not represent changes in the Fed’s stance on monetary policy ... * WASHINGTON (12/2/09)--Large regional and community banking firms that have built up concentrations of commercial real estate (CRE) loans will be affected by emerging conditions in real estate markets, said Joe Greenlee, a Fed official, during a speech Monday before the House Financial Services subcommittee on oversight and investigations. Demand for commercial property has declined and vacancy rates have increased, which pressures construction and development projects that don’t generate income until after completion, he said. At the end of the second quarter, about $3.5 trillion of outstanding debt was in CRE losses. Of the amount, $1.7 trillion was held on the books of banks and thrifts. Nine percent of CRE loans in bank portfolios were delinquent, doubling last year’s levels ...