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MBLs at risk with proposed RBC change, Udall, Scott write

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WASHINGTON (5/28/14)--Sens. Mark Udall (D-Colo.) and Tim Scott (R-S.C.) have joined the growing number of legislators in Washington, D.C., expressing concerns about the National Credit Union Administration's risk-based capital (RBC) proposal.
 
A longtime credit union supporter, Udall noted in his Tuesday letter to the NCUA, "It is important for NCUA to carefully consider the appropriateness of risk weights that deviate significantly from analogous regulations administered by other federal financial regulators."
 
"I have sponsored legislation to permit well-capitalized credit unions with a history of business lending to lend more to small businesses," Udall wrote. "I am concerned that the consequence of a final rule constructed without close attention to input from the credit unions could be a reduction in these institutions' ability and willingness to lend to their small business members."
 
Last year, Udall sponsored the Credit Union Small Business Lending Enhancement Act, which would increase the credit union member business lending (MBL) cap to 27.5% of assets, from the current 12.25%-of-assets level.
 
He noted it is critical that regulators focus on parts of the financial system that could "undermine safety and soundness of financial institutions without unnecessarily constraining their ability to lend responsibly."
 
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. (See related story: Final countdown: Hours left to submit RBC proposal comments.)
 
Scott chimed in Tuesday with a letter to the NCUA as well. Scott was previously a board member for Summerville, S.C.-based Heritage Trust FCU, with $475 million in assets. In his letter he also expressed concerns with the proposed risk weightings for member business loans.
 
"I have very significant concerns that a regulatory action could draw $7 billion of capital out of the economy at this time," Scott wrote. "Because of credit unions' limited avenues for raising capital, it is likely that this proposal would force them to charge higher lending and financial services fees, reduce dividend payments to members and deter new depositors."
 
Approximately 1,000 credit unions would be affected, based on a conservative estimate, requiring them to raise between $3 billion and $4 billion in new capital and collectively, credit unions' buffers or margins above being well-capitalized would decline by $7.6 billion.

Sen. Bill Nelson (D-Fla.), Heidi Heitkamp (D-N.D.) and Al Franken (D-Minn.) also have submitted comment letters.

CUNA survey finds parents unsure of college costs

 Permanent link
WASHINGTON (5/28/14)--A survey conducted by the Credit Union National Association found that more than half of parents of college-age students do not know how long it will take to pay off student loans or the average interest rate of that debt. The online Financing Children's College Education Survey polled 717 parents of 17- or 18-year-olds who plan to or are seriously considering attending a college or university.
 
According to the survey, 59% of parents of prospective U.S. college students are not able to guess the average rate of their future loans, 53% do not know how long it will take to pay off future loans and 25% do not know their children's expected debt at graduation. 
 
The survey also found that 86% of parents believe that their children are at least somewhat likely to receive a high-paying job upon graduating, suggesting that parents are willing to pay the cost of college tuition even while not knowing how their associated borrowing will affect their future debt and financial health.
 
"Today's findings suggest that the parents of graduating high school seniors could face significant levels of increased debt," said Pat Keefe, CUNA's senior vice president/chief communications officer. "Parents should speak with financial professionals to plan for their financial future, including their credit unions."
 
He added, "Managing debt is an important part of realizing one's financial goals and these debts can get on the parents' balance sheet right when they need to start planning in earnest for retirement. Credit unions stand ready to help in the planning."
   
Keefe also said the survey's findings are of particular concern because 68% of parents say that their children will need federal loans, and 40% indicated they will need private loans to support their tuition.
 
Other findings include:
  • Twenty-two percent of respondents anticipate taking out two or more student loans, while 11% anticipate a single loan.
     
  • Forty-eight percent reported that they didn't know how many loans their children would need to graduate.
     
  • Of the respondents who do have an idea of how much money they will owe when they graduate, 6% expect to have debt under $10,000; 22% say they will owe $10,000-$24,999; 22% expect debt of $25,000-$49,999; 13% expect debt of $50,000-$74,999; 6% expect to have debt between $75,000-$99,999; and 6% expect to have more than $100,000 in debt at graduation.
The Washington Post's WonkBlog cited the CUNA survey Friday in a post examining the perception of college debt.
 

Hensarling sets June deadline for NCUA 'reputation risk' remarks

 Permanent link
WASHINGTON (5/28/14)--Rep. Jeb Hensarling (R-Texas), chair of the House Financial Services Committee, requested that the National Credit Union Administration, along with other regulators, provide "reputation risk" comments by June 12.
 
Hensarling asked that National Credit Union Administration Chair Debbie Matz, Federal Reserve Chair Janet Yellen, Federal Deposit Insurance Corp. Chair Martin Gruenberg and Comptroller of the Currency Thomas Curry respond with the following information:
  • Whether or not the agency considers "reputation risk" in its supervisory duties, and if so, an explanation of why it is an appropriate element of the agency's supervisory program.
     
  • If the agency does consider "reputation risk," what data is used to determine its effects on an institution's safety and soundness. Also, an explanation of why this data is not already accounted for under traditional capital adequacy, assets, management capability, earnings, liquidity and sensitivity to market (CAMELS) ratings.
     
  • If the agency does use "reputation risk," whether or not a poor rating under this analysis is sufficient to recommend a change in an institution's business practices despite a strong rating under traditional CAMELS analysis.
Hensarling is concerned that the idea of "reputation risk" relies on subjective judgment, as opposed to the Uniform Financial Institutions Rating System, which uses as factors in the CAMELS rating.
 
He cites use of the "reputation risk" metric in recent guidance issued by NCUA, the Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and the Federal Reserve.
 
"Under the CAMELS supervisory framework, 'reputation risk' is not a standalone indicator that, on its own, can warrant a recommendation by your agency that a depository institution cease providing a particular product of service," the letter reads.
 
Hensarling said he is concerned that the use of a "reputation risk" indicator is too "vague, subjective and unquantifiable" to lead to a regulatory outcome, such as a depository institution that could be compelled to sever a customer relationship that is otherwise in accordance with laws and regulations, but has been the subject of unflattering press coverage or disapproval of its business model from a branch of government.
 
"The introduction of subjective criteria like 'reputation risk' into prudential bank supervision can all too easily become a pretext for advancement of political objectives, which can potentially subvert both safety and soundness and the rule of law," he wrote.

Veterans' magazine rates NCUA highly as workplace

 Permanent link
ALEXANDRIA, Va. (5/28/14)--The National Credit Union Administration has been rated as a "Best of the Best" when it comes to career opportunities for veterans by U.S. Veterans Magazine. In 2014, 47% of NCUA's new hires have been veterans, and they make up 16% of the agency's overall workforce.
 
"As part of our efforts to make NCUA an employer of choice, we want to be certain veterans know about the kinds of job opportunities available at the agency. We also want access to this group of talented workers with a commitment to public service," said NCUA Board Chair Debbie Matz.
 
The NCUA joined forces with the Department of Veterans Affairs in September 2013 to create more opportunities for veterans through the Feds for Vets program. The agency also focuses on veterans and the Pathways Internship Program, which aims to reach entry-level candidates, including disabled veterans, and provides flexibility to veterans who are recent graduates.
 
According to DiversityComm Inc., the parent company of U.S. Veterans Magazine, scores are awarded based on policies supporting equal access, advancement and inclusion of all individuals, as well as other activities demonstrating a commitment to diversity and equal opportunity.

San Antonio Mayor Castro nominated for HUD position

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WASHINGTON (5/28/14)--President Barack Obama has nominated San Antonio Mayor Julian Castro to be the new Housing and Urban Development (HUD) secretary. Castro, 39, is one of the youngest mayors of a major city in the United States.
 
Castro is the grandson of Mexican immigrants and, in 2001, he was San Antonio's youngest elected councilman at age 26.
 
Elected as mayor of San Antonio in 2009, Castro has followed the footsteps of longtime friend Henry Cisneros, who himself was the youngest elected councilman in San Antonio in 1975, became mayor of the city, and served as HUD secretary under former President Bill Clinton from 1993 to 1997.
 
If confirmed, Castro will replace Shaun Donovan, who has been nominated to be the new director of the White House Office of Management and Budget.

Final countdown: Hours left to submit RBC proposal comments

 Permanent link
WASHINGTON (5/28/14)--The comment deadline has arrived. Stakeholders' views on the National Credit Union Administration's risk-based capital plan are due to the agency by 11:59 p.m. (ET) today.
 
The NCUA already has more than 1,100 letters in hand.
 
The hundreds of comments by credit unions are joined in the NCUA's files by many other voices, including a joint letter representing the views of more than 320 members of the House and individual letters of concern from five senators. (See related story: MBLs at risk with proposed RBC change, Udall, Scott write.)
 
The agency also has heard from agricultural and community groups, who warn of the negative impact the proposal could have on consumers if credit union funds are diverted away from serving members. Reflecting concerns of many credit unions, the groups warned that unreasonably high capital requirement to reach a "well-capitalized" designation (10% of assets), and what some say are faulty asset risk weights, could result in too much capital and dramatically limit credit union growth in the long term.
 
Credit Union National Association President/CEO Bill Cheney underscored that the comments received by the NCUA show a deep level of thought--and of concern--surrounding this proposal. 
 
"An incalculable number of work-hours have been dedicated, within the credit union community and beyond, to detailing changes that are needed to the NCUA plan, if the agency is determined to move forward with a proposal," Cheney said.

"The number of comment letters alone reflects that this is the most significant proposed rulemaking that credit unions will face likely for years to come," he added.
 
The CUNA leader also urged credit unions to remain involved in this regulatory discussion going forward.
 
"All three NCUA board members have said they anticipate changes to the plan before it is finalized--and credit unions have to remain engaged in affecting those changes," he said, reminding that the agency is conducting three Listening Sessions on the proposal now that the comment period is drawing to a close.
 
Use the resource links for more on the RBC plan and for NCUA's Listening Session schedule.

NEW: CUNA: Risk-based capital plan has 'serious flaws,' should not proceed

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WASHINGTON (5/28/14, UPDATED 7:33 p.m. ET)--The National Credit Union Administration should not proceed with its proposed rule on risk-based capital (RBC), the Credit Union National Association wrote in its comment letter submitted today. CUNA believes that the proposal has serious flaws and could damage credit unions, and has recommended that the proposal be withdrawn on the grounds that the NCUA has not established economic or legal grounds as a basis for their proposed changes.
 
"Credit unions have been subjected to a number of new rules in the wake of the financial crisis, but none of them is as potentially harmful as this proposal," the CUNA comment letter, signed by CUNA President/CEO Bill Cheney, states. "Indeed, the economic and legal issues spawned by the proposal are numerous, the policy questions are real, and, as evidenced by the overwhelming level of interest in this rule, the stakes for credit unions and their 99 million member owners could not be higher."
 
CUNA's 47-page letter lists several key defects in the NCUA's proposal, including:
  • The "well-capitalized" RBC requirements violate the Federal Credit Union Act, and are not well-tailored to produce appropriate levels of credit union capital;
  • The proposal would needlessly interfere with credit union operational capabilities to meet the credit needs of their communities, particularly in the areas of business and mortgage lending, and other financial necessities; and,
  • Contrary to a stated goal of the proposal, it does not significantly reduce losses to the National Credit Union Share Insurance Fund (NCUSIF), nor does it effectively identify potential credit union failures (without overcapitalization of other credit unions).
CUNA instead advocates for the current system to be retained alongside "positive and meaningful reform" related to capital and prompt corrective action. This reform would involve congressional and regulatory action, and encourage the following:
  • The NCUA working with the credit union system in urging Congress to allow credit access to supplemental capital.
  • The NCUA, along with credit unions, working to amend the law and give the agency the power to establish net worth levels that define prompt corrective action capital classifications, similar to those granted to banking regulators.
  • Establishment of a Basel-style system with appropriate risk weightings taking into consideration credit unions' operational history and organizational structure, with different RBC ratio levels to be either adequately or well capitalized).
Among the other recommendations CUNA makes in its letter:
  • The NCUA should continue providing a risk mitigation credit as under the current rule;
  • The agency should permit supplemental capital for RBC purposes;
  • Additional comments on a new proposal should be sought; and
  • The NCUA should give credit unions much more time to comply.
"CUNA has historically supported risk-based capital but cannot support this proposal," Cheney states in the CUNA letter. "We urge NCUA to address the numerous fundamental issues we are raising by incorporating our recommendations and reissuing a new proposal for comments from the credit union system and other stakeholders."
 
Use the resource link for CUNA's comprehensive letter.

San Antonio Mayor Castro nominated for HUD position

 Permanent link
WASHINGTON (5/28/14)--President Barack Obama has nominated San Antonio Mayor Julian Castro to be the new Housing and Urban Development (HUD) secretary. Castro, 39, is one of the youngest mayors of a major city in the United States.
 
Castro is the grandson of Mexican immigrants and, in 2001, he was San Antonio's youngest elected councilman at age 26.
 
Elected as mayor of San Antonio in 2009, Castro has followed the footsteps of longtime friend Henry Cisneros, who himself was the youngest elected councilman in San Antonio in 1975, became mayor of the city, and served as HUD secretary under former President Bill Clinton from 1993 to 1997.
 
If confirmed, Castro will replace Shaun Donovan, who has been nominated to be the new director of the White House Office of Management and Budget.

MBLs at risk with proposed RBC change, Udall, Scott write

 Permanent link
WASHINGTON (5/28/14)--Sens. Mark Udall (D-Colo.) and Tim Scott (R-S.C.) have joined the growing number of legislators in Washington, D.C., expressing concerns about the National Credit Union Administration's risk-based capital (RBC) proposal.
 
A longtime credit union supporter, Udall noted in his Tuesday letter to the NCUA, "It is important for NCUA to carefully consider the appropriateness of risk weights that deviate significantly from analogous regulations administered by other federal financial regulators."
 
"I have sponsored legislation to permit well-capitalized credit unions with a history of business lending to lend more to small businesses," Udall wrote. "I am concerned that the consequence of a final rule constructed without close attention to input from the credit unions could be a reduction in these institutions' ability and willingness to lend to their small business members."
 
Last year, Udall sponsored the Credit Union Small Business Lending Enhancement Act, which would increase the credit union member business lending (MBL) cap to 27.5% of assets, from the current 12.25%-of-assets level.
 
He noted it is critical that regulators focus on parts of the financial system that could "undermine safety and soundness of financial institutions without unnecessarily constraining their ability to lend responsibly."
 
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. (See related story: Final countdown: Hours left to submit RBC proposal comments.)
 
Scott chimed in Tuesday with a letter to the NCUA as well. Scott was previously a board member for Summerville, S.C.-based Heritage Trust FCU, with $475 million in assets. In his letter he also expressed concerns with the proposed risk weightings for member business loans.
 
"I have very significant concerns that a regulatory action could draw $7 billion of capital out of the economy at this time," Scott wrote. "Because of credit unions' limited avenues for raising capital, it is likely that this proposal would force them to charge higher lending and financial services fees, reduce dividend payments to members and deter new depositors."
 
Approximately 1,000 credit unions would be affected, based on a conservative estimate, requiring them to raise between $3 billion and $4 billion in new capital and collectively, credit unions' buffers or margins above being well-capitalized would decline by $7.6 billion.

Sen. Bill Nelson (D-Fla.), Heidi Heitkamp (D-N.D.) and Al Franken (D-Minn.) also have submitted comment letters.

Final countdown: Hours left to submit RBC proposal comments

 Permanent link
WASHINGTON (5/28/14)--The comment deadline has arrived. Stakeholders' views on the National Credit Union Administration's risk-based capital plan are due to the agency by 11:59 p.m. (ET) today.
 
The NCUA already has more than 1,100 letters in hand.
 
The hundreds of comments by credit unions are joined in the NCUA's files by many other voices, including a joint letter representing the views of more than 320 members of the House and individual letters of concern from five senators. (See related story: MBLs at risk with proposed RBC change, Udall, Scott write.)
 
The agency also has heard from agricultural and community groups, who warn of the negative impact the proposal could have on consumers if credit union funds are diverted away from serving members. Reflecting concerns of many credit unions, the groups warned that unreasonably high capital requirement to reach a "well-capitalized" designation (10% of assets), and what some say are faulty asset risk weights, could result in too much capital and dramatically limit credit union growth in the long term.
 
Credit Union National Association President/CEO Bill Cheney underscored that the comments received by the NCUA show a deep level of thought--and of concern--surrounding this proposal. 
 
"An incalculable number of work-hours have been dedicated, within the credit union community and beyond, to detailing changes that are needed to the NCUA plan, if the agency is determined to move forward with a proposal," Cheney said.

"The number of comment letters alone reflects that this is the most significant proposed rulemaking that credit unions will face likely for years to come," he added.
 
The CUNA leader also urged credit unions to remain involved in this regulatory discussion going forward.
 
"All three NCUA board members have said they anticipate changes to the plan before it is finalized--and credit unions have to remain engaged in affecting those changes," he said, reminding that the agency is conducting three Listening Sessions on the proposal now that the comment period is drawing to a close.
 
Use the resource links for more on the RBC plan and for NCUA's Listening Session schedule.

CUNA survey finds parents unsure of college costs

 Permanent link
WASHINGTON (5/28/14)--A survey conducted by the Credit Union National Association found that more than half of parents of college-age students do not know how long it will take to pay off student loans or the average interest rate of that debt. The online Financing Children's College Education Survey polled 717 parents of 17- or 18-year-olds who plan to or are seriously considering attending a college or university.
 
According to the survey, 59% of parents of prospective U.S. college students are not able to guess the average rate of their future loans, 53% do not know how long it will take to pay off future loans and 25% do not know their children's expected debt at graduation. 
 
The survey also found that 86% of parents believe that their children are at least somewhat likely to receive a high-paying job upon graduating, suggesting that parents are willing to pay the cost of college tuition even while not knowing how their associated borrowing will affect their future debt and financial health.
 
"Today's findings suggest that the parents of graduating high school seniors could face significant levels of increased debt," said Pat Keefe, CUNA's senior vice president/chief communications officer. "Parents should speak with financial professionals to plan for their financial future, including their credit unions."
 
He added, "Managing debt is an important part of realizing one's financial goals and these debts can get on the parents' balance sheet right when they need to start planning in earnest for retirement. Credit unions stand ready to help in the planning."
   
Keefe also said the survey's findings are of particular concern because 68% of parents say that their children will need federal loans, and 40% indicated they will need private loans to support their tuition.
 
Other findings include:
  • Twenty-two percent of respondents anticipate taking out two or more student loans, while 11% anticipate a single loan.
     
  • Forty-eight percent reported that they didn't know how many loans their children would need to graduate.
     
  • Of the respondents who do have an idea of how much money they will owe when they graduate, 6% expect to have debt under $10,000; 22% say they will owe $10,000-$24,999; 22% expect debt of $25,000-$49,999; 13% expect debt of $50,000-$74,999; 6% expect to have debt between $75,000-$99,999; and 6% expect to have more than $100,000 in debt at graduation.
The Washington Post's WonkBlog cited the CUNA survey Friday in a post examining the perception of college debt.
 

Veterans' magazine rates NCUA highly as workplace

 Permanent link
ALEXANDRIA, Va. (5/28/14)--The National Credit Union Administration has been rated as a "Best of the Best" when it comes to career opportunities for veterans by U.S. Veterans Magazine . In 2014, 47% of NCUA's new hires have been veterans, and they make up 16% of the agency's overall workforce.
 
"As part of our efforts to make NCUA an employer of choice, we want to be certain veterans know about the kinds of job opportunities available at the agency. We also want access to this group of talented workers with a commitment to public service," said NCUA Board Chair Debbie Matz.
 
The NCUA joined forces with the Department of Veterans Affairs in September 2013 to create more opportunities for veterans through the Feds for Vets program. The agency also focuses on veterans and the Pathways Internship Program, which aims to reach entry-level candidates, including disabled veterans, and provides flexibility to veterans who are recent graduates.
 
According to DiversityComm Inc., the parent company of U.S. Veterans Magazine, scores are awarded based on policies supporting equal access, advancement and inclusion of all individuals, as well as other activities demonstrating a commitment to diversity and equal opportunity.

Hensarling sets June deadline for NCUA 'reputation risk' remarks

 Permanent link
WASHINGTON (5/28/14)--Rep. Jeb Hensarling (R-Texas), chair of the House Financial Services Committee, requested that the National Credit Union Administration, along with other regulators, provide "reputation risk" comments by June 12.
 
Hensarling asked that National Credit Union Administration Chair Debbie Matz, Federal Reserve Chair Janet Yellen, Federal Deposit Insurance Corp. Chair Martin Gruenberg and Comptroller of the Currency Thomas Curry respond with the following information:
  • Whether or not the agency considers "reputation risk" in its supervisory duties, and if so, an explanation of why it is an appropriate element of the agency's supervisory program.
     
  • If the agency does consider "reputation risk," what data is used to determine its effects on an institution's safety and soundness. Also, an explanation of why this data is not already accounted for under traditional capital adequacy, assets, management capability, earnings, liquidity and sensitivity to market (CAMELS) ratings.
     
  • If the agency does use "reputation risk," whether or not a poor rating under this analysis is sufficient to recommend a change in an institution's business practices despite a strong rating under traditional CAMELS analysis.
Hensarling is concerned that the idea of "reputation risk" relies on subjective judgment, as opposed to the Uniform Financial Institutions Rating System, which uses as factors in the CAMELS rating.
 
He cites use of the "reputation risk" metric in recent guidance issued by NCUA, the Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and the Federal Reserve.
 
"Under the CAMELS supervisory framework, 'reputation risk' is not a standalone indicator that, on its own, can warrant a recommendation by your agency that a depository institution cease providing a particular product of service," the letter reads.
 
Hensarling said he is concerned that the use of a "reputation risk" indicator is too "vague, subjective and unquantifiable" to lead to a regulatory outcome, such as a depository institution that could be compelled to sever a customer relationship that is otherwise in accordance with laws and regulations, but has been the subject of unflattering press coverage or disapproval of its business model from a branch of government.
 
"The introduction of subjective criteria like 'reputation risk' into prudential bank supervision can all too easily become a pretext for advancement of political objectives, which can potentially subvert both safety and soundness and the rule of law," he wrote.