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GAO identifies some FDIC insurance fund issues

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WASHINGTON (4/23/12)--Some of the Federal Deposit Insurance Corporation's (FDIC) processes for deriving and reporting estimates of losses to its deposit insurance fund are deficient, but, overall, that agency's controls over financial reporting are effective, the Government Accountability Office (GAO) said in its audit of the FDIC's 2011 financial statements.

The GAO audit specifically found issues in the FDIC's loss estimate reporting of resolution transactions involving shared loss agreements.

Under shared loss agreements, the FDIC absorbs a portion of the loss on a specified pool of assets. This approach maximizes asset recoveries, minimizes FDIC losses, and reduces immediate cash needs, the agency said. This approach is used in selected purchase and assumption transactions.

The audit said these deficiencies resulted in undetected errors in draft 2011 insurance fund financial statements. These errors were flagged and ultimately corrected by the FDIC. "While these deficiencies, individually and collectively, do not constitute a material weakness in internal control over financial reporting, they nevertheless increase the risk of additional undetected errors or irregularities in the DIF's financial statements," the GAO said.

The GAO also reported other less significant matters involving FDIC's internal control over financial reporting. The GAO did not make any recommendations in the report, but did say it would produce a separate report on the issues identified in the audit, and provide recommendations on how the FDIC could strengthen its own internal controls.

For the GAO report, use the resource link.

CUNA releases 12-question CU overdraft survey

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WASHINGTON (4/23/12)—The Credit Union National Association (CUNA) is asking credit unions to share information regarding their overdraft protection programs, and overdraft transfer and marketing practices, through a short, 12-question CUNA survey.

CUNA developed the survey in response to an action by the Consumer Financial Protection Bureau (CFPB) earlier this year when it distributed questionnaires to financial institutions to help evaluate how those institutions' overdraft policies affect consumers.

In the CUNA survey, CUNA asks for basic information on the credit union's asset size, and what types of overdraft programs are offered to members.

More specific questions addressing how members are made aware of available overdraft protection programs and how members are alerted to the possibility that a transaction may trigger an overdraft fee are also among the survey questions.

The CUNA survey does not collect any identifying information, and credit union participation will be strictly anonymous. Responses must be received by CUNA by April 27.

The CFPB's overdraft project is particularly focused on addressing the practice of re-ordering purchases and payments to maximize overdraft fee charges, on whether consumers can anticipate and avoid overdraft fees, and on how differences in the way institutions explain and promote overdraft programs may affect opt-in rates.

The CFPB has said it plans to use overdraft comments from consumers, the financial services industry, and other interested parties to craft new overdraft fee disclosures and rules, assist with policymaking on overdraft practices, and to prioritize the bureau's regulatory and education work.

For the CUNA survey, use the resource link.

NCUA highlights green progress for Earth Day

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ALEXANDRIA, Va. (4/23/12)--With many participating in Earth Day observations this past Sunday, the National Credit Union Administration (NCUA) took the opportunity to highlight the positive steps it has taken through the "greeNCUA" initiative, which aims to help the agency decrease its overall environmental footprint.

NCUA Chairman Debbie Matz said her agency understands its environmental responsibility, and takes that responsibility seriously each and every day.

"The greeNCUA initiative encompasses thousands of small, individual decisions throughout the year in order to make it a big, ongoing success," she added, and Matz encouraged "all credit unions to make the same commitment by creating a culture that promotes and rewards individual decisions that add up to environmental successes."

The NCUA noted it has helped reduce unneeded paper use by distributing email communications through its NCUA Express and NCUA CU Express systems, purchasing only recycled paper, and setting all office printers to print double-sided documents. The agency over the past year has also adopted energy efficient lighting in its Alexandria, Va. central office, and has installed motion detectors in that office to keep the lights off in unoccupied rooms.

Old electronics, used cell phones, and paper have also been recycled, and the agency also requires contractors to use low volatile organic compound paint in any refurbishing projects that are done in the building.

"Going green is a total commitment NCUA has made," Matz said.

For the full NCUA release, use the resource link.

Alabama Central CU employee prohibited by NCUA

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ALEXANDRIA, Va. (4/23/12)—Michael John Young, a former employee of Alabama Central CU, Birmingham, Ala., has been prohibited from future work at any federally insured financial institution by the National Credit Union Administration (NCUA) following his conviction on one count of bank fraud.

Young was sentenced to 17 months in prison, five years of supervised probation, and ordered to pay$140,000 in restitution, according to an NCUA prohibition order released Friday.

Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

Use the resource link below to access NCUA enforcement orders online.

Inside Washington (04/20/2012)

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  • WASHINGTON (4/23/12)--Comptroller of the Currency Thomas Curry on Thursday noted that eligible borrowers affected by government settlement with the country's five largest mortgage servicers can sign up for the Office of Comptroller of Currency's foreclosure-review process. "I want people to know this process is free to eligible borrowers who ask for a file review, and that they give up absolutely none of their rights in asking for the independent review of their case," Curry said in a speech at a conference on reviving home ownership. "All eligible borrowers who request a review can be assured that their file will be reviewed professionally and evaluated fairly to determine whether errors resulted in financial injury." The deadline for requesting a review is July 31. Later this month an additional round of outreach and advertising will begin to help increase awareness of the program, Curry said …
  • WASHINGTON (4/23/12)--While small-business lending has made a recovery since the recession, gaps remain in the market, Karen Mills, head of the Small Business Administration (SBA) said in American Banker (April 20). That gap is in small loans and the underserved markets, including women-owned and minority-owned businesses, Mills said. Banks and other lenders made $30.5 billion of SBA-backed loans to small businesses in fiscal year 2011, a 35% increase from 2011. The Credit Union National Association (CUNA) and credit unions are urging Congress to increase credit unions' members business lending (MBL) cap to 27.5% of assets from 12.25%. Doing so would open up more opportunity to offer MBLs, inject $13 billion in loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers, CUNA said …
  • WASHINGTON (4/23/12)--The House Financial Services Committee last week voted to terminate the Office of Financial Research (OFR) and sharply questioned an OFR official during a hearing. During the hearing, Republicans criticized the OFR open-ended budget authority and its failure to provide more specifics about how it will evaluate its own performance. Michele Shannon, OFR chief operating officer, said office is aware of concerns about data privacy, and will seek to minimize duplicative data-collection with other federal agencies. Shannon said the OFR exists to fill the gaps of other agencies. Rep. James Renacci (R-Ohio) questioned whether OFR is providing specific information about its expenditures. He cited a request for $29 million to cover expenses for one quarter of the current fiscal year …
  • WASHINGTON (4/23/12)--Banks will be expected to fully comply with the so-called Volcker Rule by July 21, 2014, or two years after the rule technically takes effect, regulators announced Thursday. The rule bars banks from proprietary trading and limits their investments in private-equity and hedge funds …
  • WASHINGTON (4/23/12)--The Consumer Financial Protection Bureau (CFPB) last week provided guidance about compliance with the fair lending requirements of the Equal Credit Opportunity Act. After the bulletin's release, during a panel discussion at a National Community Reinvestment Coalition conference in Washington, Patrice Ficklin, the agency's assistant director for fair lending, said fair lending touches every aspect of what the agency does (American Banker April 20). Ficklin said the office, which was created by the Dodd-Frank Act, interacts with different offices and programs across CFPB, including bank and nonbank supervision, rulemaking and community engagement. CFPB has authority to enforce the Equal Credit Opportunity Act and the Home Mortgage Disclosure Act. Prudential regulators enforce the other two fair lending laws--the Fair Housing Act and the Community Reinvestment Act …
  • WASHINGTON (4/23/12)--The Federal Deposit Insurance Corp. (FDIC) Advisory Committee on Economic Inclusion (ComE-IN) will meet Thursday to discuss the results of its Model Safe Accounts Pilot program; opportunities for banks offering mobile financial services to meet the needs of unbanked and underbanked consumers; and differences in consumer protections for debit, credit and prepaid cards. The committee will also welcome four new members: Robert Annibale, global director of Citi Community Development and Microfinance; José Cisneros, treasurer of the City and County of San Francisco; Andrea Levere, president/CEO of the Corporation for Enterprise Development (CFED); and John C. Weicher, senior fellow and director, Center for Housing and Financial Markets, Hudson Institute. The FDIC's Model Safe Accounts pilot, with nine financial institutions participating, was launched in January 2011 for one year to determine the feasibility of banks offering safe, low-cost transaction and savings accounts. The results of the pilot will be presented to the committee and the final report will be released at the ComE-IN meeting …