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CUNA asks for more time for Reg D changes

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WASHINGTON (12/20/11)--The Credit Union National Association (CUNA) has asked the Federal Reserve to give credit unions and other financial institutions a minimum of nine months to prepare for pending changes to its Regulation D, which governs reserve requirements of depository institutions.

The Fed's Reg D proposal is intended to simplify the administration of reserve requirements. The proposal would create a common two-week maintenance period for all depository institutions, create a penalty-free band around reserve balance requirements in place of carryover and routine penalty waivers, discontinue as-of adjustments related to deposit revisions, replace all other as-of adjustments with direct compensation, and eliminate the contractual clearing balance program. 

In a comment letter that was sent to the Fed on Monday, CUNA noted that credit unions are working to implement many of the new regulations imposed as a result of the Dodd-Frank Act and other regulatory initiatives, and said "requiring depository institutions to put into operation any of the proposed changes in the first quarter of 2012 may prove unduly burdensome," particularly for smaller credit unions.

Overall, CUNA said it generally supports the proposed Reg D amendments, but also questioned the value of a related requirement of Reg D that limit transfers from savings to transaction accounts. CUNA also urged the Fed to reconsider its six transfer limitation on transfers and/or withdrawals from savings deposit accounts, and suggested the Fed either raise this limit or abolish it entirely.

"Due to technological advances, consumers can now make payments and transfers online, via telephone, at point-of-sale terminals, and via Automated Clearing House (ACH) transactions," and these advances have enabled financial institutions "to deliver financial services to consumers conveniently and at lower costs." The six transfer limitation "unreasonably restricts consumers from being able to easily access their own funds for their own use," CUNA said.

CUNA also encouraged further efforts to reduce regulatory burdens on credit unions, including those under Reg D.

For the full comment letter, use the resource link.

Little left for CUs as Congress looks to leave D.C.

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WASHINGTON (12/20/11)--Neither hearings nor other items of interest to credit unions are on the congressional agenda this week, but members of the U.S. House remain in Washington as they continue to work on a potential bipartisan payroll tax cut bill.

The Senate approved a two month extension of the payroll tax cut and federal benefits for the unemployed, but that legislation was rejected by the House on Monday. Most senators have left Washington for a holiday recess, however, and It is not clear if the U.S. Senate will return to session before the end of the holidays to address the legislation.

Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs Ryan Donovan said the House may ask the Senate to hold a conference on this legislation, moving the responsibility for hammering out a bicameral agreement to a small group of leaders. Addressing these issues retroactively early next year also appears to be an option, he added.

Language that would have extended the National Flood Insurance Plan until 2016 was not included in the Senate's payroll tax legislation. However, the NFIP is expected to be extended until May of 2012 once a $1 trillion omnibus federal government funding bill, which was approved by Congress late last week, is signed into law.

That bill also addresses the National Credit Union Administration's (NCUA) Central Liquidity Facility (CLF), the NCUA's Community Development Revolving Loan Fund (CDRLF), the U.S. Treasury Department's Community Development Financial Institution (CDFI) Fund, and the Cooperative Development Program (CDP). (See related Dec. 19 story: NFIP, CLF, other CU issues addressed by spending bill)

Inside Washington (12/19/2011)

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  •  WASHINGTON (12/20/11)--President Barack Obama on Friday nominated Dick Berner for director of the Treasury Department's new office of financial research. Berner is currently counselor in the Treasury's office of research and quantitative studies. He was a member of the economic advisory panel of the Federal Reserve Bank of New York, a panel of economic advisers of the Congressional Budget Office, the executive committee of the board of directors of the National Bureau of Economic Research, and the advisory committee of the Bureau of Economic Analysis …
  • WASHINGTON (12/20/11)--The expected adoption of global rules laid out in Basel, Switzerland, would be a defeat for large U.S. banks that contended the guidelines were too strict. The Basel rules require large financial institutions to hold extra capital. Financial institutions argue that the requirements will prompt them to reduce lending and hurt the economy (The Wall Street Journal Dec. 19). The requirements are designed to end the "too big to fail" model that was critical in causing the financial crisis of 2008. The Basel committee has designated eight systemically important U.S. banks that are required to hold extra capital, but they have not indicated how much capital each bank would be required to carry …

Fed adjusts small institution CRA thresholds

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WASHINGTON (12/20/11)--The Federal Reserve has adjusted the asset-size thresholds it uses to define small bank, small savings association, intermediate small bank, and intermediate small savings associations under Community Reinvestment Act (CRA) regulations.

Under the new Fed standards:

  • Small banks or small savings associations will mean institutions that have held less than $1.16 billion in assets over the past two years;
  • Intermediate small banks or intermediate small savings associations will mean institutions that have held at least $290 million in assets over the past two years but less than $1.16 billion in assets in either of the last two years.
These standards will become effective on Jan. 1, according to the Fed.

The Fed bases these adjustments on changes to the average of the Consumer Price Index (CPI) for urban wage earners. That index increased by 3.43% between November 2010 and November 2011.

MBL cap lift is an answer to biz lending crunch CUNA

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WASHINGTON (12/20/11)--An American University Investigative Reporting Workshop analysis of recent Federal Deposit Insurance Corp. (FDIC) data has found that loans to small businesses are at a 10-year low, and even successful small businesses are having issues accessing credit.  However, but Credit Union National Association (CUNA) President/CEO Bill Cheney reminds that allowing credit unions to make more loans to their small business members would ease this credit crunch and help the economy.

The FDIC statistics showed that banks reported 1.5 million outstanding loans of $1 million or less to small businesses as of Sept. 30, and the amount of these types of loans has fallen consistently since 2008.

The American University analysis found that the volume of loans made to small businesses has fallen 14.7% from the peak amount, while overall commercial and industrial lending by banks has increased for the past five quarters. The reduction in credit "has had an even bigger impact" on small businesses, and, the report notes, "the sheer length of the country's economic woes has left small businesses with fewer reserves and hardly ready to jump back up, were conditions to start looking up."

"As we have been saying for some time: Small business owners are not finding the support they need from banks, and this latest analysis gives additional weight to our view," Cheney said.

"Small business-owning credit union members want to create jobs. To do that, they need a financial partner who will stand with them and help their business succeed with credit when they need it and support for their payrolls and other aspects of their operations," Cheney said. "Credit unions have been that partner for many of their members, but it will become increasingly difficult in the future for credit unions to continue that role, unless Congress gives credit unions more authority to make member business loans (MBLs)," he added.

CUNA estimates that increasing the current 12.25% of assets MBL cap to 27.5% of a credit union's total assets would have a number of beneficial effects on the ailing economy, including infusing $13 billion in new credit for small businesses and adding 140,000 new jobs within the first year of enactment--all at no cost to the American taxpayer.

Credit unions have been picking up some of the small loan slack, as a recent Biz2Credit Small Business Lending Index report showed that credit unions granted 57% of the small lending requests brought by their members in November. Big banks approved 10% of their small business loan requests, by comparision. (See related Dec. 19 story: Biz lending up, CUs outshine big, small banks)