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Inside Washington (05/29/2009)

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* WASHINGTON (6/1/09)--The Obama administration has sent up a “trial balloon” for a plan to revamp regulation of the nation’s financial institutions into a single entity, and critics have rendered it as “dead on arrival.” In a Tuesday interview, House Financial Services Chairman Barney Frank (D-Mass.) said there is little chance Congress would pass such a plan (American Banker May 29). Under the Treasury Department’s plan, the Federal Deposit Insurance Corp. (FDIC) and the Federal Reserve Board would continue to exist, but would have other responsibilities, though FDIC would continue to insure deposits. The American Banker article explored the issue in a “frequently asked questions” format. It asked how the plan would undermine the dual banking system and how it would be better than the current system in place ... * NORWALK, Conn. (6/1/09)--The Financial Accounting Standards Board (FASB) may not issue a final rule on enhanced disclosures for fair value measurements until mid-November, although its original intent was to have it out either the second or third quarter of the year. FASB’s technical director said May 27 that the board’s plan to debut the strengthened disclosures during an informal trail period would push back the originally planned timeframe. The test disclosure documents have yet to be drafted. The idea behind the trail is to discover, prior to a final vote, whether the revised disclosure requirements would be practicable for a range of entities. (BNA, Inc. Daily Report for Executives May 28)… * WASHINGTON (6/1/09)--The Federal Reserve Board’s Consumer Advisory Council will meet June 18. As time permits, the council will discuss the following subjects: The future of the Community Reinvestment Act; the impact of credit scoring on the credit environment, and related issues; neighborhood and community stabilization strategies; foreclosure prevention, the performance of modified mortgages, and other issues related to foreclosures; and reports by committees and other matters. The advisory council’s main function is to advise the Fed board on its responsibilities under various consumer financial services laws… * WASHINGTON (6/1/09)--The Federal Deposit Insurance Corp. (FDIC) has tightened its rate restrictions for institutions that are less than well capitalized. The Federal Deposit Insurance Act requires the FDIC to prevent banks that are less than well capitalized from seeking deposits at rates significantly higher than prevailing rates. Currently, the FDIC ties these permissible interest rates on deposits solicited nationally to the comparable maturity Treasury yield. Interest rates on deposits solicited locally are tied to undefined prevailing local interest rates. “The subjectivity in our current rule is allowing some weak banks to drive up costs for the rest of the industry,” said FDIC Chairman Sheila Bair in a release. “Supervisors and banks need a simpler and more objective tool for achieving the statutory goal. “Starting Jan. 1, the FDIC’s final rule will define nationally prevailing deposit rates as a direct calculation of those national averages, as computed and published by the FDIC based on data available to it. The rule applies only to the small minority of banks that are less than well capitalized… * WASHINGTON (6/1/09)--The Small Business Administration (SBA) announced Thursday it will guarantee loans to finance inventory for auto, recreational vehicle, boats and other dealerships beginning July 1. The Dealer Floor Plan can “offer some dealerships the opportunity to get through these tough economic times by allowing them to keep their inventory and cash flow intact, as well as save the jobs these small businesses provide,” said SBA Administrator Karen Mills. The program will be available through Sept. 30, 2010, when SBA will decide whether to continue the program. Loans will be available for a minimum of $500,000 up to $2 million under the 7(a) program ... * WASHINGTON (6/1/09)--Clara Pratte will serve as national director for the Small Business Administration’s Office of Native American Affairs. Pratte will work to ensure that American Indians, Native Alaskans and Native Hawaiians have the tools they need to create, develop and expand small businesses. Pratte previously worked for the Navajo Nation as a policy analyst and legislative liaison. She also was employed by the Department of Commerce at the International Trade Administration as a trade specialist in the U.S. Foreign and Commercial Service. She is an enrolled member of the Navajo Nation ... * WASHINGTON (6/1/09)--The Federal Deposit Insurance Corp. (FDIC) board approved creating an FDIC advisory committee on community banking to provide the agency with guidance on policy issues that impact small community banks. The committee is expected to look into issues including examination policies and procedures, credit and lending practices, deposit insurance assessments, insurance coverage issues, regulatory compliance matters and obstacles preventing the growth of the banks. Paul Nash, deputy to the chairman for external affairs, has been named as the designated federal official for the committee ...

NCUA sets webinar on new law implementation

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ALEXANDRIA, Va. (6/1/09)--The National Credit Union Administration (NCUA) will present its guidance on implementing its new corporate credit union stabilization plan in a webinar scheduled for June 24. The webinar will follow the NCUA’s June 18 board meeting, and will give participating credit unions an opportunity to have their questions answered directly by NCUA staff. NCUA Chief Financial Officer Mary Ann Woodson has said that she would analyze the financial impact that the newly enacted provisions would have on the agency. Once completed, the results of this analysis will be reported to the NCUA board, and will also be released to the public. The corporate stabilization plan, which President Barack Obama signed into law as part of S. 896, increases NCUA’s borrowing authority to $6 billion, with a possible further extension to $30 billion under exigent circumstances. The stabilization plan will also allow credit unions to spread the cost of National Credit Union Share Insurance Fund (NCUSIF) 1% deposit replenishment over seven years. Credit unions will also be granted up to eight years to deal with the cost of a premium assessment that has resulted from losses at wholesale corporate credit unions. Additionally, any impairments related to the NCUSIF replenishment may be booked over a seven-year period. The NCUA has provided the Credit Union National Association (CUNA) with further information the estimated credit losses sustained due to WesCorp and U.S. Central’s investments in mortgage-backed and asset-backed securities after CUNA submitted a request under the Freedom of Information Act. CUNA is also filing a follow-up request that would seek more data on the losses.

CUNA to CUs Compliance efforts should focus on new card rules

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WASHINGTON (6/1/09)—Recently enacted credit card laws overlap with the Federal Reserve’s Regulation Z rules and the National Credit Union Administration’s (NCUA) unfair and deceptive acts or practices rules (UDAP) that were issued last year. The Credit Union National Association (CUNA) recommends that credit unions focus on the new law with regard to their efforts to be in compliance with Reg. Z amendments and UDAP requirements. Portions of the credit card law, which was signed by President Barack Obama in May, contain requirements that are similar to those set forth by Regulation Z. Reg Z provides guidelines for the disclosure of the terms and cost of many types of consumer loans, and UDAP, which seeks to govern certain credit card and loan business practices. However, the new law will also push many effective dates forward, with some provisions entering into force in 9 months and others becoming effective within 90 days. Also, the requirements under the new law will be implemented under the Truth in Lending Act, and not under the UDAP statute. "Credit unions should focus now on complying with the new credit card law and follow these provisions to the extent that they differ from the rules that were issued last year, while also keeping in mind the new effective dates," CUNA Senior Assistant General Counsel Jeffrey Bloch has advised. He has noted that the Fed is expected to review and make changes to their new rules as part of the normal rulemaking process. However, specific guidance is not expected before that time. The Fed, the NCUA, and the Office of the Comptroller of the Currency are holding ongoing discussions on the status of the recent UDAP rules, which may include withdrawing the UDAP rules. The UDAP rules, if they remain in place, would have to be reworked to ensure consistency with the new laws. The agencies could work together or work separately to discuss any conflicts within the rules. The Fed has said that they are receptive to any questions or comments that may arise and they will work with CUNA to resolve possible compliance issues for credit unions. CUNA will hold an audio conference call on these issues on June 18. CUNA is also working on resource materials comparing elements of Reg. Z and UDAP to the new credit card laws, and will present them shortly.

CUNA CEO addresses CU stabilization plan concerns

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WASHINGTON (6/1/09)—Although he said he could not fully predict what the implementation of the National Credit Union Administration’s (NCUA) corporate stabilization plan would mean for credit unions, Credit Union National Association (CUNA) President/CEO Dan Mica answered some of the most frequently mentioned concerns in a recent letter to credit union officials. The NCUA’s current plan, which was signed into law by President Barack Obama on May 21, would 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. In the letter, Mica estimated that credit unions could be charged a premium of 10-15 basis points of insured shares this year. The amount of future insurance premiums could increase, decrease, or remain the same. The exact amount of the premiums would “depend on what the actual losses turn out to be on the securities held by the corporates, and by the extent of insurance losses from any difficulties that arise from natural person credit unions,” according to CUNA estimates. While many credit unions have said that they would “just as soon pay the losses” and write down their NCUSIF-related costs all at once, CUNA believes that spreading out the cost over time is doing a service to all credit unions, including those that have been hit hard by the economic crisis. Also, any write downs that have already been made will likely need to be reversed, as the affected deposits will no longer be impaired. NCUA has not announced exactly when credit unions will need to make any adjustments to their accounting, but CUNA believes that all federally insured credit unions will apply the same accounting methods to their NCUSIF costs by years end. The NCUA is expected to address NCUSIF implementation at its next board meeting, scheduled for June 18.

CUNA analyzes new Fed check processing changes

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WASHINGTON (6/1/09)—An analysis of a final rule addressing restructuring of the Federal Reserve’s check processing operations in regions 4 and 9 is now available on the Credit Union National Association’s (CUNA) website. The CUNA analysis addresses the Fed’s recently issued final rule amending appendix A of Regulation CC to rework some of the Fed’s check processing operations. Appendix A of Regulation CC helps financial institutions divide local from non-local checks by providing a routing number guide. Under the Fed amendments, a check processing facility in Minneapolis, Minn., which is located within federal reserve region 9, will be closed, and all checks that were routed to that processing facility will now instead be routed to the Cleveland Reserve Bank, which is in fed region 4, effective July 25, 2009. This change is expected to shorten the permissible hold period of some checks from that region, and some credit unions may need to change their availability schedules and related disclosures. Credit unions may also need to notify their members of these changes. Use the resource link below for the full analysis.