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New NCUA bill would spread out replenishment

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ALEXANDRIA, Va. (3/27/09)--The National Credit Union Administration (NCUA) announced Thursday that it has drafted legislation allowing credit unions to spread the cost of the National Credit Union Share Insurance Fund (NCUSIF) replenishment over as many as seven years. At issue is the cost to natural person credit unions of recent actions by the NCUA to stabilize the corporate credit union system. In January the NCUA issued a guarantee for uninsured shares at all corporate credit unions through February 2009, and established a voluntary guarantee program for uninsured shares of all corporate credit unions through Dec. 31, 2010. The agency also issued a $1 billion capital note to U.S. Central Corporate FCU (U.S. Central). The NCUA at the time also declared a premium assessment to restore the NCUSIF equity ratio to a statutory minimum of 1.20% and said the premium would be collected in 2009. As noted, the NCUA proposed legislation would allow credit unions to spread out the cost. The proposed legislation would create a mechanism, the Corporate Credit Union Stabilization Fund, to absorb losses associated with the corporate credit union stabilization actions and spread out the associated costs to federally insured credit unions over seven years. According to NCUA documents, the agency would use the Stabilization Fund to pay expenses associated with the ongoing problems in the corporate system. The fund may borrow money from the U.S. Treasury on a revolving basis. The NCUA noted its draft legislation would take a current $100 million borrowing authority for the NCUSIF and increase it to $6 billion. However, the draft bill stipulates that the maximum combined borrowing for the new stabilization fund and the NCUSIF would be capped at $6 billion at any one time. The stabilization fund would be required to repay the Treasury, with interest, all amounts borrowed, but has discretion to time each repayment and the amount of principal included with each repayment. The NCUA also said its new fund would make assessments on federally insured credit unions as it determined necessary to make each repayment. The Board must close the Stabilization Fund down seven years after the initial borrowing.

Objectives OK but CUNA has questions about NCUA plan

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WASHINGTON (3/27/09)—Credit Union National Association (CUNA) President/CEO Dan Mica said CUNA supports the objective behind a federal regulators’ draft bill, which is to spread out credit union costs associated with recent actions addressing corporate credit union stability, but has important questions to bring up to the agency. Mica was remarking on the National Credit Union Administration’s plan to ask Congress to form a Corporate Credit Union Stabilization Fund to absorb losses associated with agency actions to bolster the corporate system. The draft bill would allow federally insured credit unions to spread out the associated costs over seven years. (See related story: New NCUA bill would spread out replenishment.) “Ultimately,” Mica said Thursday, “we hope to work with NCUA to present to Congress and pass legislation that will give credit unions the resources and flexibility they need to replenish the share insurance fund.” “CUNA will also continue working with the agency,” he added. In a related event, the NCUA revealed its cost for a report by Pacific Investment Management Company LLC (PIMCO) on corporate credit unions. The PIMCO report was the basis, in part, of the NCUA's recent action –to conserve two corporate credit unions, U.S. Central FCU, Lenexa, Kan., and Western Corporate FCU (WesCorp), San Dimas, Calif. PIMCO is a PIMCO is a leading global investment management firm. Conflicting with earlier accounts, the NCUA said the PIMCO fee was $4.5 million and that it was .001% of the par value of the portfolio viewed. The NCUA said the credit union securities held exceeded $45 billion.

Inside Washington (03/26/2009)

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* WASHINGTON (3/27/09)--The Obama administration released its plan for financial regulation overhaul Thursday, which would establish a single agency to oversee systemically important firms and critical payment and settlement systems. It also would establish higher standards on capital and risk management for systemically important firms, require hedge funds above a certain size to register and require covered institutions to fund the resolution authority--which could take the form of a mandatory appropriation to the Federal Deposit Insurance Corp. out of the Treasury’s general fund. According to The New York Times (March 26), the proposal on hedge funds may prove to be the most controversial in the financial industry. Credit Union National Association President/CEO Dan Mica testified Tuesday at a Senate Banking Committee hearing, saying that credit unions need an independent regulator, one that understands the nuances and differences between credit unions and for-profit financial institutions. Mica also said that institutions who have not posed risks, such as credit unions, should be kept out of the new regulations (News Now March 25) ... * WASHINGTON (3/27/09)--The Federal Reserve Board would take the lead to determine which financial institutions are systemically risky, if legislation by the Treasury Department sent to Capitol Hill Wednesday is approved. The bill also would give the Federal Deposit Insurance Corp. (FDIC) resolution duties. Before the Fed could recommend closing down a firm, however, it would need the support of a federal regulator such as the FDIC, the Commodity Futures Trading Commission or the Securities and Exchange Commission (American Banker March 26). The FDIC also could place a firm into conservatorship, put it into a receivership or support it financially. The costs incurred by FDIC for creating a bridge company or buying its assets would be covered through asset sales and special assessments. Congress also would fund the FDIC ... * WASHINGTON (3/27/09)--Federal regulators sent mixed messages about lending standards during a House hearing Wednesday, indicating that communication between lawmakers and regulators on the matter needs to improve (American Banker March 26). House Financial Services Committee Chairman Barney Frank (D-Mass.) said lawmakers are partly to blame for the mixed messages. Lawmakers tell regulators to lend and not to lend. However, lenders must find a way to lend again without making bad loans, Frank said. There has to be a balance, added Timothy Long, national bank examiner at the Office of the Comptroller of the Currency (OCC). The OCC is working on making sure the problems that contributed to the credit crisis are not repeated, Long said. Several lawmakers also noted that bankers are not giving credit to worthy borrowers and many small businesses are in jeopardy because they cannot get funding. At a Senate Banking Committee hearing Tuesday, Sen. Charles Schumer (D-N.Y.) questioned why credit unions’ member business lending caps should be restricted at 12.25% when small businesses are having trouble securing credit (News Now March 25) ... * WASHINGTON (3/27/09)--The Federal Deposit Insurance Corp. (FDIC) announced Thursday that it is seeking public comment for the Legacy Loans Program. The program seeks to remove bad loans and assets from FDIC-insured institutions and put them up for sale. The FDIC also offered a conference call Thursday that provided an overview of the loans. The program was announced Monday ...

Online reporting TISA comment dates set

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WASHINGTON (3/27/09)—Comments to the National Credit Union Administration (NCUA) on its proposals regarding online reporting and Truth in Savings Act disclosures are due to the agency May 26. Both proposals were published in the Thursday Federal Register, setting the comment deadline. Also published was a final rule amending the NCUA’s Regulatory Flexibility (RegFlex) Program, setting the effective date as April 27. All three issues were addressed at the NCUA’s most recent open board meeting, which tool place March 19. The proposed online reporting rule would provide a web-based system to allow federally insured credit unions to submit reports and information online. The new system is expected to be implemented the third quarter of 2009. The NCUA has said it will send a letter to credit unions regarding the new system in early September and will make the system mandatory for credit unions with Internet access by Oct. 1. Regarding TISA disclosures, the NCUA’s rule is statutorily required to be “substantially similar” to the Fed’s. Therefore, the NCUA plan would, among other things, require credit unions to disclose on the periodic statement the dollar amounts charged for overdraft fees and returned item fees, both for the month and the year-to-date. Currently, only credit unions that promote or advertise the payment overdrafts are required to provide these disclosures. The NCUA final RegFlex rule increases the time period within which a federal credit union must partially occupy a completed new premises without obtaining a waiver from the NCUA. Previously, a RegFlex credit union had three years to at least partially occupy or it had to get a waiver. The new final rule increases that to six years, but only for acquisitions of unimproved land.

CUNA call-to-action targets CUs ire on corporates

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WASHINGTON (3/27/09)—A credit union call to action launched Wednesday by the Credit Union National Association (CUNA) generated thousands of communications to the federal regulator seeking more information on the decision to place two corporate credit unions (CCU) into conservatorship last week. An early estimate by CUNA showed about 20,000 emailed inquiries were fired off within 24 hours of the CUNA request for action. Credit unions were asked to urge each National Credit Union Administration (NCUA) board member to provide greater transparency regarding a report by Pacific Investment Management Company LLC (PIMCO) on corporate credit unions (CCU). The PIMCO report was the basis, in part, of the NCUA's action Friday to conserve two corporate credit unions, U.S. Central FCU, Lenexa, Kan., and Western Corporate FCU (WesCorp), San Dimas, Calif. PIMCO is a leading global investment management firm. CUNA also encouraged credit unions to push the NCUA to approve a mechanism to spread out the costs associated with recent agency actions addressing the corporate system. The NCUA had scheduled a special closed meeting for Thursday morning to address CCU issues. The agency unveiled draft legislation Thursday afternoon that would allow the insurance costs to federally insured credit unions associated with NCUA's actions regarding corporate credit unions to be spread out over time. (See related story: New NCUA bill would spread out replenishment.) CUNA has removed its call to action from its website.

CUNA urges NCUA board for more information

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WASHINGTON (3/27/09)—The Credit Union National Association (CUNA), citing the urgings of every credit union that that has weighed in, is directly asking the National Credit Union Administration (NCUA) to provide information on analysis that lead to the agency’s actions to conserve two corporate credit unions last week. Specifically, CUNA placed its request in writing for information on the assumptions, analysis, and findings in a Pacific Investment Management Company LLC (PIMCO) report and all data used in making the decisions on the conservatorships of U.S. Central FCU, Lenexa, Kan., and Western Corporate FCU, San Dimas, Calif. CUNA, in its letter by President/CEO Dan Mica, reminded the three NCUA board members that the group has been seeking the information for “some time.” Alternatively, the Mica letter said, if the PIMCO information cannot be provided, CUNA requests the NCUA provide CUSIP numbers of all securities held by the corporate credit unions. CUNA said it intends to use the information to produce its own analysis to be used by the credit union system to evaluate loss at the corporates. Noting that credit unions feel “concern, outrage, anger, and frustration” with the current situation, Mica wrote that the CUNA board of directors has directed CUNA to work in “every possible cooperative way to resolve these issues in an agreeable and acceptable manner for credit unions.” “Simply put, credit unions have lost confidence and trust in their regulator and feel that our request for additional data, information, communication, and cooperation is being ignored,” Mica added. CUNA is willing to go further to obtain the information credit unions desire if necessary, the federal regulators were told. “(O)ur board has also directed me ‘to take all necessary actions including Congressional hearings, direct contact with the administration, and up to including all possible legal remedies,’ if we are not able to obtain the information credit unions are seeking,” Mica said. The NCUA has scheduled a special closed meeting for today on possible actions it might pursue, legislative as well as regulatory, to mitigate the costs to natural person credit unions of the agency’s actions to stabilize the corporate credit union system.