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CUNA: CUs' dissatisfaction with exams ticks up

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WASHINGTON (3/27/14)--Based on results of the Credit Union National Association's ongoing
Click to view larger image Source: CUNA
 survey of credit unions' satisfaction with the federal and state examination processes, as of February 2014 more credit union CEOs were satisfied with their exams (58%) than dissatisfied (27%), although this finding has slipped slightly from 2012's results of 61% and 25%
The CUNA survey also found that:
  • Exams tended to take longer in 2013 (9.1 days) than in 2012 (7.9 days);
  • There was a slight decline between 2013 and 2012 in the number of credit unions reporting being under one or more Documents of Resolution (DOR), from 43% to 41%;
  • Exams conducted by state examiners are substantially less likely to include DORs than exams in which the National Credit Union Administration is involved; and
  • Examinations conducted solely by state examiners tend to be rated slightly better than NCUA-only exams, but joint exams were rated much lower than either state- or NCUA-only exams.
Agency exam teams received positive ratings on a number of items. They included: giving credit union management the opportunity to comment on or respond to examination findings before they were shared with others; being knowledgeable about the credit union being examined; being knowledgeable about key safety and soundness issues and regulatory requirements; and taking time to discuss preliminary exam findings prior to the exit meeting.
Four of five survey respondents agreed that heavier regulatory and examination requirements are putting increasing pressure on credit union resources. Many credit unions also complained of the sometimes excessive use of DORs and of instances in which examiners applied "best practices" as a regulatory standard and/or applied "guidance" as if it were enforceable regulation.
CUNA continues to encourage credit unions to participate in the survey--even if they have done so for prior exams--weighing in on the strengths and weaknesses of state and federal regulatory examinations. The information gleaned from the survey responses helps CUNA and the state credit union leagues hone their exam issue advocacy efforts with regulators.

CUNA's Examination and Supervision Subcommittee will be reviewing the survey results, and CUNA Regulatory Advocacy staff will be pursuing concerns with NCUA.
For a summary of the credit union examination survey results, use the resource link.

N.Y. Fed papers take on too-big-to-fail, other big bank issues

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WASHINGTON (3/27/14)--A series of papers by Federal Reserve economists has found the largest U.S. banks enjoy a boost--what Reuters labeled a "too-big-to-fail" advantage in financial markets--which brings lower funding and reduced operating costs.
Reuters went on to say that while the study did not pinpoint the reason big banks can borrow more cheaply, "Wall Street critics say it is because investors believe the U.S. government would again rescue them in a panic" (March 26).

The New York Fed research papers, released Tuesday in a special edition of that body's Economic Policy Review , address bank size, complexity and resolution issues.
According to the Fed papers, bank size has both benefits and costs: "The upside is the potential for economies of scale and lower operating costs; the downside is the 'too-big-to-fail' problem and associated funding advantages and moral hazard."
The papers also state that banks have become less bank-centric and more organizationally complex.
The 11 papers are titled:
  • Do Big Banks Have Lower Operating Costs?;
  • Evidence from the Bond Market on Banks' "Too-Big-to-Fail" Subsidy;
  • Do "Too-Big-to-Fail" Banks Take On More Risk?;
  • Components of U.S. Financial Sector Growth, 1950-2013;
  • The Evolution of Bank Complexity;
  • Measures of Complexity of Global Banks;
  • Matching Collateral Supply and Financing Demands in Dealer Banks;
  • Bank Resolution Concepts, Trade-Offs, and Changes in Practices;
  • The Failure Resolution of Lehman Brothers;
  • Why Bail-in? And How!; and
  • Why Are Large Bank Failures So Messy and What to Do about It?
For more on the Fed papers, use the resource link.

Hill report alleges Target weaknesses leading to data breach

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WASHINGTON (3/27/14)--U.S. retailer Target missed several opportunities to stop last year's data breach that compromised about 40 million debit and credit card numbers and the personal information of 70 million customers, a new Senate Commerce Committee report has revealed.
The report was released at a Wednesday committee hearing on the data breach.
The breach impacted credit unions, costing them an estimated $30.6 million. Future fraud could increase these costs, according to the Credit Union National Association. Credit unions are among the plaintiffs in more than 90 lawsuits that have been filed against Target.
The Senate analysis highlighted certain issues that contributed to the breach, including:
  • Target's decision to give network access to a third-party vendor that failed to follow broadly accepted information security practices. "The vendor's weak security allowed the attackers to gain a foothold in Target's network," the report said;
  • Target's failure to respond to multiple automated warnings from anti-intrusion software which detected malware installations and reported on escape routes hackers planned to use to remove data from Target's network; and
  • Target's failure to properly isolate sensitive data from other less sensitive data on its network.
Committee Chairman John D. Rockefeller IV (D-W.Va.) in a Wednesday release said, "(I)f Target--or any other company--is going to collect detailed information about its customers, they need to do everything possible to protect it from identity thieves...Target must be a clarion call to businesses, both large and small, that it's time to invest in some changes."
CUNA has asked Congress to address data security relative to merchants, who are not held to the same standards of security as credit union and other financial institutions.
In particular, CUNA suggests all payment system participants are held to comparable levels of federal data security requirements; those responsible for the data breach should be responsible for the costs of helping consumers; and those responsible should ensure consumers know where their information was breached.
For the full committee report on the Target breach, use the resource link.

Fin. Services Dems seek review of financial regulators' workplace policies

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WASHINGTON (3/27/14)--In the wake of allegations of workplace discrimination at the Consumer Financial Protection Bureau (CFPB), a group of House Financial Services Committee Democrats has asked the inspector generals of the National Credit Union Administration and all the federal financial regulatory agencies to examine the workplace practices of those agencies.
In addition to the NCUA, the requests were sent to the IGs of the Federal Deposit Insurance Corp., the U.S. Treasury Department, the Federal Housing Finance Agency, the Securities and Exchange Commission and the Federal Reserve.
The letters ask the IGs to investigate "any employee complaints, formal or informal, related to personal practices, workplace policies and the findings from any employee satisfaction surveys."
If the IG identifies any individual or group within an agency that has shown discriminatory practices or "patterns of unfair or unequal treatment," that IG is asked to recommend appropriate action to address the negative workplace situation, such as "remedial training" or firing the individuals involved in the discriminatory patterns.
Led by Reps. Maxine Waters, of California, and Carolyn Maloney, of New York, the group of eight lawmakers noted that the Dodd-Frank Act established Offices of Minority and Women Inclusion (OMWI) at most of the federal financial agencies. Those offices are charged with matters relating to diversity in management, employment and business activities.
The lawmakers' letters noted, however, that a Government Accountability Office report last year concluded that management-level representation of minorities and women among federal financial agencies and the Federal Reserve Banks had not changed substantially from 2007 through 2011.
On April 2, the House Financial Services subcommittee on oversight and investigations is calling several CFPB officials to testify regarding recent allegations that CFPB's white employees were more likely to get a higher performance rating than minority employees.
"While public attention is currently and justifiably focused on the CFPB, the most recent OMWI reports suggest the disparities impeding internal upward mobility for minorities may be endemic throughout all the agencies regulating the financial services industry," the letters stated.

NCUA kicks off Fin. Lit. events in five days

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ALEXANDRIA, Va. (3/27/14)--Make sure you're ready: Financial Literacy Month arrives in just five days.

The National Credit Union Administration sent out a reminder Wednesday encouraging credit unions to use the month to continue to help their members become smarter consumers. For instance, credit unions can partner with national and local organizations such as schools, non-profits and other consumer-focused groups to offer workshops and distribute outreach materials. (Watch for April News Now stories with a Financial Literacy logo for credit union highlights.)

"While consumer education is a year-round effort, Financial Literacy Month is a good reminder about the importance of learning how to manage money and build financial security," NCUA Chair Debbie Matz said in a release. 

She highlighted several activities NCUA has planned for the month, including:
  • April 1: A new video documenting the history of America's credit unions and the NCUA, which will be available on the agency's YouTube channel;
  • April 3: A free webinar for credit unions, "Financial Literacy: Putting Your Mission into Action," at 2 p.m. (ET) (see resource link for registration information);
  • April 10: Participation in the annual Financial Literacy Day event on Capitol Hill. Hosted by the Jump$tart Coalition, Junior Achievement USA and the Council for Economic Education, the event is intended to inform lawmakers, congressional staffers and the public about federally insured credit unions and the role of NCUA; and,
  • April 23: A Twitter chat focused on financial literacy from 11 a.m. until noon (ET).
The Twitter chat will be lead by Kenneth Worthey, Financial Literacy and Outreach Analyst with NCUA's Office of Consumer Protection.

The NCUA encourages both credit unions and consumers to follow the conversation and contribute using the #NCUAChat hashtag. Participants can submit questions ahead of time to .

This is the agency's second Twitter chat, having hosted a similar event for America Saves and Military Saves Weeks.

Also in April, the agency will feature updated pages on and the agency's financial literacy site, Pocket Cents, with new information about saving, borrowing and managing credit.

FHFA announces $9.3B PLS settlement with BoA Corp.

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WASHINGTON (3/27/14)--The Federal Housing Finance Agency (FHFA), as conservator of Fannie Mae and Freddie Mac, announced Wednesday that it has reached a settlement in cases involving Bank of America, Countrywide Financial, Merrill Lynch and certain named individuals totaling approximately $5.83 billion.
According to the agency release, the agreement provides for an aggregate payment of around $9.33 billion by Bank of America that includes the litigation resolution as well as a purchase of securities by the bank from Fannie and Freddie.
Bank of America Corp. owns Countrywide and Merrill Lynch. The cases alleged violations of federal and state securities laws in connection with private-label, residential mortgage-backed securities (PLS) purchased by Fannie Mae and Freddie Mac between 2005 and 2007. Allegations of common law fraud were made in the Countrywide and Merrill Lynch cases.
Of the 18 PLS suits filed in 2011, FHFA says it now has claims remaining in seven suits against various institutions and remains committed to satisfactory resolution of these pending actions.