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Co-ops CUNA hosted at White House

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WASHINGTON (5/4/12)--Credit Union National Association (CUNA) representatives will be among the 150 cooperative leaders, representing every cooperative sector across the country, meeting today with White House policymakers to discuss how co-ops are aiding the ongoing economic recovery, creating new jobs, and investing in their communities.

CUNA Co-op Alliances Committee Chairman and Minnesota Credit Union Network President/CEO Mark Cummins, Vice Chairwoman and Hershey FCU President/CEO Diana Roberts, committee member and Alternatives FCU CEO Tristram Coffin, and National Cooperative Business Association (NCBA) board member and Association of Vermont Credit Unions CEO Joseph Bergeron are also scheduled to attend the meeting, as are representatives from Jackson, Miss.'s Hope FCU.

The event is slated to start with a briefing from Obama administration staff, and attendees will also discuss financial cooperative issues, job creation, business development, and agriculture programs in separate breakout sessions with members of the administration.

"Every day cooperatives around the U.S. are stimulating the economy and we are pleased to have the opportunity to discuss our successes in job creation and ways to use the cooperative model to continue to strengthen communities large and small," Liz Bailey, NCBA interim president/CEO, said in a release. "Two million jobs are generated each year as a direct result of cooperatives, which illustrates the incredible impact that these organizations have on local economies," she added.

The White House event is one of many ways the NCBA is observing 2012's International Year of Cooperatives. This year has been named the International Year of Cooperatives by the United Nations and the U.S. Senate. The theme for the year is "Cooperative Enterprises Build a Better World," and CUNA has pledged to "lead efforts to engage the credit union community in the promotion of International Year of Cooperative activities."

For the full NCBA release, use the resource link.

AEA FCU continues to improve NCUA reports

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ALEXANDRIA, Va. (5/4/12)--The financial condition of AEA FCU, Yuma, Ariz., continues to improve under National Credit Union Administration (NCUA) conservatorship, the agency reported, noting that the credit union posted $839,096 in income in the first quarter of 2012.

Total assets held by the credit union stood at $245.1 million at the end of the quarter, and the credit union's net worth also improved by 18 basis points during the quarter.

The NCUA placed the credit union into conservatorship in late December, saying that it was not adequately capitalized under standards set forth in the Federal Credit Union Act and had earnings "insufficient to enable it to continue under present management." The agency at that time said the credit union's difficulties sprang from problems in its loan portfolio.

The loan difficulties were caused by a $50 million fraudulent business loan scheme. Yuma businessman Frank Ruiz; William Liddle, AEA's former vice president of lending; and Liddle's wife, Rhonda Liddle, allegedly took part in the scheme. Ruiz was recently sentenced to 24 months in prison and three years' supervision, and Liddle and his wife are awaiting sentencing.

The credit union recently completed an organization-wide rebranding effort, improved its credit and debit card services, and has enhanced its website.

"Our goal for 2012 is to continue the efforts to transition AEA back to a financially strong credit union," said Elizabeth Whitehead, NCUA Region V director. During the conservatorship, the agency has reduced the credit union's expenses, streamlined operations, and "began the process of returning AEA to the fundamental credit union business model," Whitehead said, adding that the NCUA has seen significant progress in all of these areas.

For the full NCUA release, use the resource link.

CUs bring reg concerns to NCUA listening session

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WASHINGTON (5/4/12)--In launching the first of her series of "Listening Sessions" to hear credit union concerns, National Credit Union Administration (NCUA) Chairman Debbie Matz acknowledged that there are concerns about regulatory burdens that are shared by many credit unions and she encouraged credit unions to raise those issues at the sessions.

At this week's Boston session, Matz said, "We can talk about anything except a specific credit union's supervisory issues," and told the group the agency's presentations had been minimized to give credit unions more time to raise their issues.

Among the 90 or more participating credit union officials were Dan Egan, president/CEO of the Massachusetts Credit Union League, New Hampshire Credit Union League, and Credit Union Association of Rhode Island, attended the session along with Credit Union Association of New York Credit Union President Bill Mellin, and Massachusetts/New Hampshire/Rhode Island leagues General Counsel Mary Ann Clancy.  Most attendees were from NCUA's Region I, which includes the northeastern region of the country.

NCUA board Members Gigi Hyland and Michael Fryzel, along with senior NCUA staff, also attended. Deputy General Counsel Mary Mitchell Dunn participated for the Credit Union National Association.

A variety of concerns were brought up at the meeting by credit union officials. One credit union representative urged that NCUA examiners not simply focus on the negative aspects of a credit union's operations during their examination and indicated that the examination report should reflect positive developments at the credit unions as well as any less favorable ones.

NCUA officials agreed this should be part of the process and NCUA Director of Examination and Insurance Larry Fazio indicated that during agency training, such as the recent conferences in Florida, examiners are being encouraged to look at the whole picture at the credit union.

Another credit union official raised the issue of the credit union regulatory model and questioned whether NCUA is taking any role in standing up to other agencies, including the Consumer Financial Protection Bureau (CFPB), on issues that may mean more regulations for credit unions such as the regulation of overdraft protection programs.

Matz said that the agency does discuss concerns with other regulators and that she recognizes credit unions have raised legitimate issues about their overdraft protection plans. The CFPB currently is studying financial institutions' overdraft protection programs.

Whether the NCUA is planning to assess National Credit Union Share Insurance Fund premiums based on risk was another question and the agency clarified that such a move would require a statutory amendment. The NCUA clarified for CUNA that the agency is not contemplating pursuing such legislation.

The agency also is looking at risk management and ways to improve prompt corrective action. CUNA will be monitoring those efforts very closely.

Problems that credit unions have had getting approvals from NCUA was another matter, including when there is a waiver of a regulatory provision involved. The agency encouraged the participants to submit recommendations for improvements in the waiver process.

NCUA should seek more guidance from credit unions on how to solve problems, one participant recommended, and another questioned an NCUA examiner's limiting definition of the word "direct" as it relates to the experience requirement for those engaging in member business lending.

Another question: When might Nevada and California return to Region V? The questioner was told Nevada may return next year although that is not certain and NCUA did not indicate when California may return to its former region.  Such decisions, based, in part, on consideration of resource needs, are made later in the year.

During the financial crisis, the NCUA shifted these states to NCUA Region II, which has a number of more experienced examiners.

The impact of credit union mergers and the consolidation that is ongoing in the system was also discussed, including what constitutes a "failed credit union," for purposes of agency takeover.  Currently, the agency must "prove that by the numbers the credit union will fail" before the NCUA can treat the institution as one that will not revive.

Whether the NCUA would consider returning to an 18-month examination cycle was also raised. The agency was not positive about that recommendation, but CUNA and the leagues plan to continue that discussion with the agency, particularly for well-managed credit unions.

NCUA's Fazio echoed the chairman's remarks that, overall, communication between credit unions and examiners needs to be improved. "We need to do more to listen to credit unions" during the examination process, Fazio said.

A dialogue between credit unions and examiners should occur before, during, and after examinations, to avoid any surprises, he added. When examiners do find issues at a credit union, they should give credit union management a chance to explain how they would deal with the issue, and should accept the credit union's solution, if it is reasonable, he added.

Fazio also emphasized that examiners are being instructed to cite the specific legal authority for their directives. This has been a major concern for number of credit unions who have felt that the examiner was being arbitrary in ordering certain directives and not able to provide any legal basis for their directives.

Also during the session, Matz noted CUNA for its work with the CFPB and said CUNA has been "very engaged."  She also noted CUNA's efforts to bring together accounting experts to discuss issues regarding troubled debt restructuring (TDR) that led to the development of the NCUA's recent TDR proposal. The proposal may be on the agency's monthly meeting agenda May 24.

Other listening sessions have been planned for:

  • May 9 in Alexandria, Va.;
  • June 5 in St. Louis, Mo.;
  • June 13 in Orlando, Fla.;
  • July 10 in San Diego, Calif.; and
  • July 31 in Denver, Colo.
The sessions are scheduled to be held between 1 and 4 p.m. (ET). Registration is limited to the first 150 reservations.

CUNA and league officials are planning to attend all sessions to hear what credit unions raise as well as the  NCUA's responses, and will follow up with its Examination and Supervision Subcommittee and the NCUA on key issues brought p during the sessions.

For more on the sessions, use the resource link.

Inside Washington (05/03/2012)

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  • WASHINGTON (5/4/12)--Among the topics addressed in a recent private meeting between the Federal Reserve Board and CEOs of several major U.S. banks were pending regulatory reform laws, the results of stress tests and alternative credit ratings. The Fed made details of the meeting public Wednesday. Many of the issues were related to the Dodd-Frank Act. The Fed's policy is to make public any meeting in which Dodd-Frank is addressed. Bank executives attending the meeting included Lloyd Blankfein of Goldman Sachs, Richard Davis of U.S. Bancorp, Jamie Dimon of JPMorgan Chase & Co., James Gorman of Morgan Stanley, Jay Hooley of State Street Corp. and Brian Moynihan of Bank of America Corp. The meeting was held at the Federal Reserve Bank of New York. In regard to recent stress tests, banks' internal models did not synch with the Fed's models, raising questions from bankers. Among the proposed regulations discussed were a rule that would prohibit banks from participating in proprietary trading, known as the Volcker Rule, and alternatives credit ratings. Bankers said they were concerned that the Fed's proposed alternative credit ratings--required by the Dodd-Frank Act--may overstate the risk of certain assets …
  • WASHINGTON (5/4/12)--Republicans on the House Financial Services Committee issued a letter to the Federal Housing Finance Agency (FHFA) on Monday asking if the agency has the statutory authority to reduce mortgage principal at Fannie Mae and Freddie Mac. In the letter, the Republicans asked Acting FHFA Director Edward DeMarco six questions regarding the possible effects of principal reduction. Although the letter did not provide a specific recommendation on what the agency should do, congressional Republicans previously have sided those who have resisted write-down proposals (American Banker May 3). DeMarco has also expressed doubt about whether FHFA has the authority to mandate the write-downs. Last Friday, an FHFA spokeswoman said a decision on principal reduction will not be made until the agency concludes its principal forgiveness analysis and discussions with the Department of the Treasury …
  • WASHINGTON (5/4/12)--Without implementation of reforms to the financial system, regulators and lawmakers will have lost an opportunity to end "too big to fail," Federal Reserve Board Gov. Daniel Tarullo said Wednesday. Tarullo, speaking before the Council on Foreign Relations in New York, said post-crisis regulatory reform program has been primarily directed at the too-big-to-fail problem, and more generally at enhancing the resiliency of the largest financial firms. The Dodd-Frank Act established the Financial Stability Oversight Council (FSOC), which has the authority to regulate any non-bank financial firm whose failure could be the source of systemic problems, Tarullo said. Dodd-Frank also has mandated capital requirements and liquidation authority, he added. Under liquidation authority, the Federal Deposit Insurance Corp. can impose losses on a failed institution's shareholders and creditors, and replace its management. Tarullo also noted the Basel Committee's framework for calibrating capital surcharges for banks of global systemic importance. Another proposed reform is quantitative liquidity requirements. The Basel Committee generated two such proposals, both of which have been delayed, Tarullo said. "Of one thing I am sure: If we do not complete rigorous implementation of this complementary set of reforms, we will have lost the opportunity to reverse the pre-crisis trajectory of increasing too-big-to-fail risks," Tarullo said  …