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Matz to be nominated as NCUA chair

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WASHINGTON (5/22/09)—Debbie Matz is President Barack Obama’s choice to become the new chair of the National Credit Union Administration (NCUA), the White House announced Thursday. Matz is a former member of the NCUA board, confirmed by the Senate on March 22, 2002 for a term ending August 2005, although she remained a few months longer to assure a smooth transition to a new member. Matz was executive vice president and chief operating officer of $800 million-in-assets Andrews FCU, in Suitland, Md., until June 2008. Credit Union National Association President/CEO Dan Mica said Thursday, “Our sincere thanks to President Obama for ensuring the NCUA board has its full complement to face the many critical issues now before credit unions. Ms. Matz has strong credit union credentials and, from our past experience with her, we know her as a solid and competent regulator. “We look forward to working with her. We thank Rodney Hood for his service on the board, as well as to Michael Fryzel for his tenure as board chairman.” Hood, was nominated to the NCUA to fill a vacancy when Dennis Dollar left his position more than a year earlier. Hood’s term expired in April. The two remaining board members are current Chairman Michael Fryzel, who took the position in August 2008 and whose term extends in to 2013, and Gigi Hyland, confirmed at the same time as Hood, and whose term ends in 2011. Obama, who announced his intention to nominate several other nominees at the same time as Matz--including Winslow Sargeant, as chief counsel for advocacy for the U.S. Small Business Administration-- said of his candidates: “I'm grateful that such experienced and dedicated individuals have joined my administration at a time when our nation faces great challenges. Their deep commitment to their individual areas of work gives me confidence that they will help us put America back on a path to prosperity and security. I thank them for their service and look forward to working alongside them in the years to come." The president’s nominees must go through the confirmation process, which includes a nomination and confirmation hearing, and, if approved, a formal swearing in.

Inside Washington (05/21/2009)

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* WASHINGTON (5/22/09)--A discussion on how to reform the U.S. financial system’s regulatory structure took different directions at a Wednesday Senate Banking Committee hearing. Sen. Bob Corker (R-Tenn.) said he was opposed to legislation that would give the government resolution powers over systemically important financial institutions. The Treasury should be given the power to resolve the institutions on a case-by-case basis, he said (American Banker May 21). Sen. Richard Shelby (R-Ala.) said he was against any plan that would give the Federal Reserve Board more power over systemic risk. Treasury Secretary Timothy Geithner said he was open to re-evaluating every regulator--including the Fed--for reform. He also defended the Fed, saying the central bank has policies to prevent any conflict of interest and that the directors do not have a role in supervision or in the Fed’s money programs. Shelby disagreed, saying banks supervised by the Fed choose presidents of the 12 Fed banks by their board representation. The Obama administration is expected to release more details about its restructuring plan, though debates have sprung up regarding which agency should receive power. Some also have suggested that a new council to oversee systemic risk should be created ... * WASHINGTON (5/22/09)--The Federal Deposit Insurance Corp. (FDIC) is expected to vote on a rule today regarding a special assessment fee that would be charged to financial institutions based on their asset sizes. In February, the FDIC said it would charge 20 basis points per $100 of second-quarter domestic deposits to raise $15 billion for the Deposit Insurance Fund (American Banker May 21). The fee is expected to total $6 billion ... * WASHINGTON (5/22/09)--The Federal Reserve Board Wednesday approved final amendments to Regulation D--Reserve Requirements of Depository Institutions--which would allow banks to earn interest on their excess reserves and liberalize the types of transfers consumers can make from savings deposits. The Fed said in a release that it is authorizing excess balance accounts to relieve pressure on correspondent-respondent business relationships in the financial environment. It also will evaluate the need for the accounts as market conditions evolve ... * WASHINGTON (5/22/09)--On Wednesday, the White House sent a memo to all executive departments and agencies asking them to review pre-emption doctrines (American Banker May 21). The memo did not mention banks or bank regulators, but the Supreme Court next month is expected to decide the case of Cuomo v. Clearing House LLC., which will determine whether states can enforce their own laws over national banks. In the case, justices will decide if the Office of the Comptroller of the Currency overshot its pre-emption interpretation of visitorial powers in 2004 ... * WASHINGTON (5/22/09)--A Treasury Inspector General report indicated that it was alarmed that officials at the Office of Thrift Supervision (OTS) directed or approved backdating of capital at six thrifts--including IndyMac Bank, which failed in July (Reuters May 21). The other five thrifts were unnamed, but the report said backdating took place from January 2007 to August 2008. Backdating allowed IndyMac to remain “well-capitalized” and avoid a requirement that could have prevented it from taking on risky deposits. The OTS, in its response, said it has devoted resources to the issue of backdating, and provided guidance to staff and the institutions it oversees about proper capital contribution recognition. Scott Polakoff, OTS director, was placed on leave because of allegations of backdating last year. The report by the Inspector General did not release details on the review of those allegations ...

NCUA approves credit reporting act changes

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ALEXANDRIA, Va. (5/22/09)—A rule change to existing Fair Credit Reporting Act regulations that would allow consumers to take their disputes directly to the furnishers of credit report information rather than acting solely through a credit reporting agency was unanimously approved by the board of the National Credit Union Administration Thursday. Overall, the final rule, as approved, will implement portions of the Fair and Accurate Credit Transactions Act that seek to improve the accuracy and integrity of credit reports. At the meeting, NCUA staff said that reassessment and possible reform of the existing rule will begin immediately and will be ongoing. The rule will also be reexamined every three years, NCUA staff said. The resulting guidelines will be flexible and will allow organizations to determine which portions of the guidelines best apply to their individual needs. The rule will apply to federally chartered credit unions, and a separate, nearly identical Federal Trade Commission rule will apply to state-chartered credit unions. As a counterpart to the accuracy of information guidelines, the board also unanimously approved a sixty-day comment period to gather outside input on whether or not the furnishers of credit reports should promote the integrity of the information in those reports by disclosing the opening date of a given account. The NCUA will also ask for opinions on any additional information that could help ensure the integrity of the credit information.

NCUA extends corporate CU liquidity guarantee program

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ALEXANDRIA, Va. (5/22/09)—The National Credit Union Administration’s Temporary Corporate Credit Union Liquidity Guarantee Program (TCCULGP ) will now provide greater liquidity and “low-cost stable” funding sources to eligible corporate credit unions over a longer period of time after the NCUA board Thursday voted to revise parts of the program during a closed meeting. The TCCULGP provides a National Credit Union Share Insurance Fund (NCUSIF) guarantee of principal and interest for debt issued under the program. As modified, the issuance period ending date of TCCULGP funds will be extended until June 30, 2010 and guaranteed debt will not expire until June 30, 2017. The fees paid on existing debts will also change, with debts with a maturity of up to two years being subject to an annualized assessment rate of 10 basis points. Debts with a maturity of six to seven years will be charged 35 basis points, yearly, with graduated price points for many dates in between. This fee structure should “provide sufficient income to fund any losses related to the TCULGP,” NCUA Chairman Michael Fryzel said in a statement accompanying the release. The revised terms would also restrict the amount of NCUSIF-covered debt that corporate credit unions could issue. Corporate credit unions looking to take part in the TCCULGP must execute a new TCCULGP Agreement. Eligible creditors must ensure that a given debt obligation qualifies for coverage under the newly-revised TCCULGP and must also “obtain and record” confirmation that the participating credit union “intends that particular obligation to be guaranteed by the NCUA“ to cover any debt obligation issued after June 30, 2009, the NCUA release said.

CU SIP investments excluded from fidelity bond calculations

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ALEXANDRIA, Va. (5/22/09)—Credit unions may now exclude from their total assets, for purposes of calculating minimum fidelity bond coverage, any outstanding investments in the Credit Union System Investment Program (CU SIP). Under CU SIP, the NCUA's Central Liquidity Facility (CLF) makes a secured, one-year advance to the natural person credit union. The credit union must concurrently invest the amount of the advance in a fixed-rate, matched-term, guaranteed note that is issued by the participating corporate credit unions. Corporate credit unions use the funds to retire borrowings from outside the credit union system. The NCUA has been working to remove impediments to participation in the program. By approving an “order to exclude” at its open board meeting Thursday, the NCUA board changed part of rule 12 C.F.R. §713.5, which set the requirement for minimum fidelity bond coverage. The waiver specifically states that all other provisions of the regulation “shall remain in effect and unchanged.” Use the resource link below to read the board action memorandum.

Impact of stabilization law being weighed by NCUA

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ALEXANDRIA, Va. (5/22/09)—National Credit Union Administration (NCUA) Chief Financial Officer Mary Ann Woodson will launch an analysis of the cost effect to the agency of newly enacted provisions to create a corporate credit union stabilization program. Just one day after President Barack Obama signed S. 896, the Helping Families Save Their Homes Act, into law, NCUA Vice Chairman Rodney Hood inquired during an open board meeting what the financial impact would to the agency. Woodson said she needed to complete her analysis of the final bill and would report back to the board. Although she did not address the timing of that report, Woodson did tell News Now that the information would be made public when available. Under S. 896, NCUA borrowing authority is increased to $6 billion, with a possible further extension to $30 billion under exigent circumstances. Credit unions may also spread the cost of National Credit Union Share Insurance Fund (NCUSIF) 1% deposit replenishment over seven years, and have up to eight years to deal with the cost of a premium assessment that has resulted from losses at wholesale corporate credit unions. Any impairment related to the NCUSIF replenishment may be booked over a seven-year period. The Credit Union Naitonal Association also is discussing the impact of the legislation on credit unions and the agency with NCUA and with accounting professionals. Also at the NCUA meeting, Woodson, during her regular NCUSIF monthly report to the board, noted a recent accounting change she executed, which removed $7.9 million from income. That income was associated with the agency's Temporary Corporate CU Liquidity Guarantee Program (TCCULGP), and the change was made to bring NCUA practices in line with those of the Federal Deposit Insurance Corp. TCCULGP provides an NCUSIF guarantee of principal and interest for debt issued under the program. Woodson noted the change was not significant enough to impact the NCUSIF net worth ratio. Other points of interest in the monthly report:
* There was a slight net loss of $2.5 million to the NCUSIF during April; the insurance fund remains in the black for the year-to-date; * The ending reserve balance is $5.4 billion, and reflects, in part, losses associated with the corporate credit unions; * There is a slight increase in low-ranked, CAMEL 4/5 credit unions, up 17 to 288 from the previous month, although up 49 from a year ago. Of the 288, 60% have assets less than $10 million, 30% have assets between $10 million and $100 million, and just 1.5% have $1 billion or more in assets. The remaining 8.5% fall in the $100 million to $1 billion category.
The monthly NCUSIF report is available online. Use the resource link below for access.

Fryzel S. 896 is a turning point for CUs

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ALEXANDRIA, Va. (5/22/09)—Wednesday’s presidential signing of S. 896, the Helping Families Save Their Homes Act, “marked the culmination of a very difficult chapter” in the National Credit Union Administration’s ongoing efforts to "resolve the difficulties facing corporate credit unions, and the credit union industry as a whole,” NCUA Chairman Michael Fryzel said in a statement Thursday. The enactment of S. 896 and the corporate credit union stabilization plans contained therein provide “a responsible and pragmatic mechanism for credit unions to maintain a strong federal insurance fund in a financially manageable manner,” Fryzel added. S. 896, which passed both legislative branches on May 19, will allow credit unions to spread the cost of National Credit Union Share Insurance Fund (NCUSIF) replenishment over a longer period of time, with a total of eight years to deal with the cost of a premium assessment that has resulted from losses at wholesale corporate credit unions. Any impairment related to the NCUSIF replenishment may be booked over a seven-year period. The bill also extended the $250,000 share and deposit insurance coverage ceiling for credit unions through 2013 and increased NCUA’s borrowing authority to $6 billion, with a possible further extension to $30 billion under exigent circumstances. Further, Fryzel said that the interest shown at a May 20 House Financial Institutions subcommittee hearing on NCUA’s corporate credit union stabilization plan was “a further indication of the importance Congress has placed on the NCUA and the industry joining together to find workable solutions.” (See related May 21 story: CUNA urges Congress to address CU capital) Fryzel asked for credit unions and politicians’ input going forward, and “underscore[d]” his recent subcommittee testimony, saying that NCUA will put its recent, hard-learned lessons “to good use” as it moves forward with corporate credit union reforms. “The industry that we all care so much about, and that has served America’s consumers so well for the past century, deserves nothing less, and I look forward to the task ahead with optimism and a sense of purpose,” he added.