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Matz: 18-month RBC timeframe not 'etched in stone' as comment period draws to close

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WASHINGTON (5/19/14)--"The 18-month timeframe in the proposed risk-based capital rule is not etched in stone," National Credit Union Administration Chair Debbie Matz told a credit union audience Friday.  She added, "If the comment letters raise sensible reasons to delay the effective date further, we will certainly consider doing so."

Matz was addressing the annual meeting of the Hawaii Credit Union Association.

With just seven business days to go before the NCUA wraps up the comment period on its risk-based capital (RBC) proposal on May 28, the letters of more than 550 credit unions and supporters had been posted to the agency website--detailing their concerns and questions regarding the plan--as of Friday evening.

That number includes an almost unprecedented letter signed by more than 320 members of the U.S. House urging the NCUA to consider impact on of its RBC plan on credit unions. The lawmakers ask the agency to provide justification and more clarity as to why the proposed risk weights differ from those applied to other community financial institutions and to give credit unions more time than the proposal's allotted 18 months to come into compliance after it is finalized.

"Seven days is plenty of time to push the number of credit union comments even higher," said Mary Dunn, Credit Union National Association deputy general counsel said Friday. "A high number of comments clearly signals to the regulator that credit unions have concerns about the proposal. CUNA encourages more credit unions to meet the comment deadline."
All three NCUA board members have indicated in letters to CUNA that the plan will be revised before adopted as a final. 

"Those assurances and Chairman Matz's newest comment show why it is imperative," Dunn said, "that credit unions weigh in in numbers on this proposal."

The RBC plan proposed by the NCUA would make changes to Prompt Corrective Action rules, replacing existing risk-based net worth requirements with new risk-weighted asset and capital requirements. The rule would apply to federally insured "natural person" credit unions with more than $50 million in assets.

CUNA supports risk-based capital for credit unions but has called this proposal "the most detrimental, wide-reaching regulatory change affecting credit unions in years" and "a regulation in search of a problem."

If adopted, the amount of capital that credit unions would need to hold in order meet minimum requirements to be well capitalized would rise by $7.6 billion according to CUNA's projections.  Credit unions would also face burdensome risk weightings that would serve as a disincentive for holding member business and mortgage loans, and long-term investments, CUNA has noted. 

CUNA President/CEO Bill Cheney addressed the matter in the Cheney Report last week, noting that the number of comments on the proposal has tripled in the last three weeks.

"CUNA supports risk-based capital, but not along the path NCUA's proposal takes. We are finalizing our comment letter now, which will offer alternatives for the agency to consider in developing a better route forward," he said.

Once the comment period closes, the NCUA will host three listening sessions: June 26 in Los Angeles, July 10 in Chicago and July 17 in Alexandria, Va.

Use resource links for CUNA's RBC Action Center and more on the NCUA listening sessions.

Rep. Terry drafts a House patent 'troll' bill

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WASHINGTON (5/19/14)--While a U.S. Senate bill to fight patent law abuses is debated in the Senate Judiciary Committee, the House now has its own legislation intended to crack down on "trolls" waving frivolous patent assertion letters around.

Rep. Lee Terry (R-Neb.) last week released draft legislation to address illegitimate patent demand letters where so-called "patent trolls" use low-quality patents in an effort to extract settlements from credit unions and other businesses. Terry, chairman of the Commerce, Manufacturing, and Trade Subcommittee of the House Energy and Commerce Committee, plans to hold a hearing on the bill on Thursday. 

Many trolls are aware that the cost of hiring a patent attorney is a deterrent to credit unions and others, and price their proposed licenses in such a way that they are sure to be lower than the cost of counsel to evaluate the demand.

"Patent trolls cost American companies tens of billions of dollars each year, and are threatening job creation and innovation," Terry said when announcing his new bill.

Terry said his draft legislation would increase transparency and accountability to help expose and prevent fraudulent infringement claims. It would do so by requiring patent demand letters to include certain basic information to help companies determine whether a letter is legitimate.

The bill also would increase the Federal Trade Commission's authority to levy fines on fraudulent patent demand practices and provide state Attorney General enforcement of the federal standard.

Terry's bill is a follow-up to broad patent litigation reform approved by the House last December, which did not address the issue of abusive patent assertion letters.

The Senate Judiciary bill, introduced by its chairman, Sen. Patrick Leahy (D-Vt.), is called the Patent Transparency and Improvements Act (S. 1720). Other Senate bills that would address patent troll issues include the Patent Litigation Integrity Act of 2013 (S. 1612), the Patent Quality Improvement Act of 2013 (S. 866) offered by Sen. Charles Schumer (D-N.Y.), and the Transparency in Assertion of Patents Act (S. 2049)  introduced by Sen. Claire McCaskill (D-Mo.) .

The Credit Union National Association has urged lawmakers to act to curb the patent system abuses. "Reforms are desperately needed. This growing problem will not be solved until Congress passes bipartisan legislation that makes clear patent trolls can no longer get away with abusing the system," CUNA has said in letters of support for such legislation.

CUNA and the state credit union associations have been active on every level urging lawmakers and the Obama administration that patent reform is needed.

Comptroller Curry outlines regulators' work for cybersecurity

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BOSTON (5/19/14)--U.S. Comptroller of the Currency Thomas J. Curry spoke to the New England Council Friday about the importance of cybersecurity in finance, particularly when it comes to financial institutions using third-party technology.
"Not so many years ago, hacking was largely the domain of bright amateurs who were mainly interested in exploring data networks or demonstrating their hacking skills to their peers. Today, though, it's the province of an array of terrorists, organized criminals and so-called 'hacktivists' intent on doing real harm," he said.
Curry noted the increasing frequency of multiple types of cyberattacks in recent years that range from distributed denial of dervice attacks to ATM cash-out schemes to the card data security breach at Target last holiday season.
Growing reliance on new commerce mechanisms, such as Internet bill payment, mobile banking and shopping through smartphone applications, can create new vulnerabilities. The consolidation of many of these platforms into a single vendor, increased reliance on foreign vendors and third-party access to financial and consumer data all bring their own set of risks that must be mitigated, Curry said.
"Each new relationship and every new connection provides potential access points to all of the connected networks, any one of which can provide access to the system," he said. "These interconnected networks are potentially vulnerable to attacks that may affect multiple organizations at one time."
The Office of the Comptroller of the Currency issued updated guidance last October that focuses on the risk-management process throughout the lifecycle of a third-party relationship, as well as urges management to directly oversee those activities.
"What concerns me most is that risk management practices haven't always kept pace with the risks institutions take on," he said.
The Federal Financial Institutions Examination Council, of which the National Credit Union Administration is a member,  has created a working group on cybersecurity issues, working with intelligence, law enforcement and homeland security to share information and help financial institutions of all sizes shore up their defenses.
"This isn't a problem that any one agency or institution can solve on its own," he said. "To deal effectively with cyberthreats, institutions both large and small need to communicate, not only with each other but also with relevant government agencies."
The NCUA in March launched a new resource for credit unions--a webpage that provides links to cybersecurity and data security resources.
Use the resource links for more information.

McWatters vote for NCUA seat: An update

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WASHINGTON (5/19/14)--The confirmation of J. Mark McWatters to the National Credit Union Administration board is still awaiting a final vote, and while it is widely expected that he will be confirmed, it may not be until later next month.
McWatters, who is currently an assistant dean at South Methodist University's School of Law, was nominated last December to replace board member Michael Fryzel, whose term ran from 2008 to Aug. 2 of last year but who is still serving on the board until his successor is seated.
"Senate confirmation of J. Mark McWatters for the seat held by Fryzel may be delayed a bit--but the wait is in no way related to McWatters," said Credit Union National Association President/CEO Bill Cheney in his weekly Cheney Report. "His nomination is grouped with three nominees for the Federal Reserve Board, and political maneuvering among senators over those confirmations is holding up the process."

McWatters will join NCUA Chair Debbie Matz and board member Rick Metsger on the three-person board that governs the NCUA once confirmed. Each member serves a six-year, staggered term.

Nominations for NCUA small-CU consulting close May 31

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ALEXANDRIA, Va. (5/19/14)--Nominations for credit unions to receive free consulting services from the National Credit Union Administration's Office of Small Credit Union Initiatives are due May 31.

"NCUA's free consulting program regularly delivers practical plans and technical advice that participating credit unions find highly valuable," NCUA Board Chairman Debbie Matz said. "Because NCUA is committed to helping small, new, minority and low-income credit unions to remain viable, I encourage all qualified credit unions to submit a nomination."

NCUA's consulting services, provided by experienced economic development specialists, offer assistance to credit unions in the areas of budgeting, marketing, policy development, strategic planning and operational or regulatory areas. Selected credit unions receive assistance for a six-month period.

To qualify a credit union must fall into one of the following categories: total assets of less than $50 million, a new charter (fewer than 10 years), designation as a Minority Depository Institution or designation as a low-income credit union.

Credit unions may nominate themselves or be nominated by their NCUA examiner. Credit unions not chosen in one round may apply again in subsequent rounds.

Qualified credit unions may submit a nomination through NCUA's website.

Use the resource links below for more information.

Health One CU of Mich. is conserved

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ALEXANDRIA, Va. (5/19/14)--The Michigan Department of Insurance and Financial Services recently detected unsafe and unsound practices at Detroit-based Health One CU and placed the state-chartered, federally insured credit union into conservatorship and named the National Credit Union Administration as agent to handle the credit union's day-to-day operations.

The state and federal regulators will work together to resolve issues affecting the credit union's safety and soundness while continuing normal credit union services to members.

Health One has 3,882 members and assets of $18.2 million, according to the credit union's March 31  Call Report. It was chartered in 1957 and serves those living in Macomb, Oakland, Washtenaw and Wayne counties in Michigan, as well as other select groups. The credit union also operates a branch in Cleveland, Ohio.

The NCUA has provided Health One members with an online frequently asked questions document that addresses conservatorship issues. Use the resource link to access the FAQs.