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Interchange governance and more focus of global leaders panel

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LAS VEGAS (7/14/10)—What lies ahead for credit unions in different parts of the world? The second of twin general session panels Tuesday addressed that issue at The 1 Credit Union Conference, the joint Credit Union National Association (CUNA) and World Council of Credit Unions (WOCCU) in Las Vegas this week.
Bill Hampel, senior vice president and chief economist at the Credit Union National Association, describes the U.S. credit unions’ governance structure in a panel discussion during Tuesday’s general session at The 1 Credit Union Conference, meeting this week in Las Vegas.
Like the earlier panel, panelists Louise Petschler, CEO of Abacus-Australian Mutuals and a WOCCU director; Bill Hampel, CUNA’s senior vice president of research and chief economist; and Hervé Guider, general manager of the European Association of Cooperative Banks, tackled the topic of board performance at the prompting of moderator and WOCCU director Daniel Burns, chair of Central 1 CU in Canada. “Australian credit unions are regulated to the same degree as banks and all financial institutions,” said Petschler. “Directors must pass a skills test to serve. If there aren’t sufficiently qualified directors on a board, the board may appoint other directors rather than wait for them to be elected by the members.” Guider agreed that directors must be able demonstrate both independence and qualifications before accepting a board position. While Australian directors are paid, European cooperative bank directors and U.S. credit union directors are unpaid. The U.S. also has no regulated standards for directors, said CUNA’s Hampel, who supported the importance of qualified candidates, but also offered a caution to the audience. “Having expertise on the board does not necessarily guarantee success,” he said.
Click to view larger imageTuesday’s general session of The 1 Credit Union Conference featured an international group discussing what lies next for credit unions around the globe. From left are panel moderator, Daniel Burns, World Council of Credit Unions (WOCCU) director and chair of Central 1 CU in Canada, with Louise Petschler, CEO of Abacus-Australian Mutuals and a WOCCU director; Bill Hampel, Credit Union National Association senior vice president of research and chief economist; and Hervé Guider, general manager of the European Association of Cooperative Banks. (Photos by World Council of Credit Unions)
The panel also touched on the impact that new interchange fees will have on credit unions. “Australia is the most regulated credit union system. We’ve dealt with the interchange issues for three years,” said Petschler. Credit unions lost $22 million in revenue but made $19 million in revenue from other reforms. For the system, it was not a major shock, but for some credit unions, it was.” The net net result has been less flexibility and higher fees for consumers, Petschler said. “It is an anti-consumer reform,” she added. Lack of member growth also became the topic of debate. Ironically, field-of-member qualifications that once helped U.S. credit unions grow have proven to be an impediment, according to Hampel. “Field of membership requirements used to be a severe restriction on credit union growth, but its legacy has proved to be just a severe nuisance,” said Hampel. “It retards growth and that growth would be greater if we could get rid of the restriction.” The group also discussed the recession’s impact on credit unions. The biggest challenge for U.S. credit unions, said Hampel, is “recovering from the recession. Credit unions themselves will be fine, but our members will be undergoing a long process of deleveraging. Credit unions must find new ways to respond to members,” he said.

CU governance challenges tops Tuesday conference panel topics

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LAS VEGAS (7/14/10)--The question of performance standards, capabilities and remuneration for credit union directors worldwide dominated discussion among regulators and economists who served as panelists during twin general session discussions Tuesday at The 1 Credit Union Conference.
Click to view larger imageThe financial crisis brought the topic of regulation and supervision to the forefront, said a global panel of regulators during The 1 Credit Union Conference, which ends today in Las Vegas. From left are the discussion’s moderator, Daniel Burns, a director of the World Council of Credit Unions and first vice chair of Credit Union Central of Canada; Andy Poprawa, president/CEO of the Deposit Insurance Corp. of Ontario, Canada; Gigi Hyland, National Credit Union Administration Board member; and Brandon Khoo, executive general manager of the Australian Prudential Regulatory Authority.
The conference is the joint meeting co-sponsored by Credit Union National Association (CUNA) and World Council of Credit Unions (WOCCU). Situations differ for directors in Australia, Canada, Europe and the U.S., but performance requirements are the same--meaning greater levels of both responsibility and risk for volunteer and paid directors at credit unions worldwide. Participants in a panel focused on recent regulatory development agreed that clearer definitions of board terms and responsibilities would make governance easier to regulate. Gigi Hyland, a board member at the National Credit Union Administration in the U.S.; Brandon Khoo, executive general manager for the Australian Prudential Regulatory Authority; and Andy Poprawa, president/CEO of the Deposit Insurance Corporation of Ontario, Canada, offered insights into conditions in each of their own countries in a panel moderated by Daniel Burns, WOCCU director and first vice chair of Credit Union Central Canada. “Currently, there are no board term limits in the U.S.,” said Hyland. “That means some directors can serve 30, 40, 50 and even 60 years. While that’s not necessarily a bad thing, it may mean that directors don’t always have the fresh set of eyes needed to see changes in their credit union and the market.”
“Many credit unions lost capital in corporates. Are the credit unions ready to step up to the plate again?” asked National Credit Union Administration Board member Gigi Hyland, appearing with an international panel of credit union regulators at The 1 Credit Union Conference Tuesday. “We have to find a way to deal with toxic assets,” she added. (Photos provided by the World Council of Credit Unions)
A larger issue in many countries is the absence of board performance standards, which has the potential to pose significant risk for some credit unions, according to Poprawa, who also chairs WOCCU’s International Regulators Roundtable, an annual meeting that will take place Thursday after the close of the conference. “We have to be satisfied that people on boards have the right set of skills, that they can read a balance sheet and financial statements. This is more challenging in small credit unions,” Poprawa added. “Governance is an area of interest and also one of primary risk for global credit unions,” said Poprawa. “The Regulators Roundtable sees this and will be addressing the possible creation of global governance standards at its meeting.” Other topics addressed by the panel included the future of corporate credit unions and access to supplemental capital. “Credit unions have been able to issue capital instruments since 1992 in Australia,” said Khoo. “They are limited in Tier 1 instruments because they’re mutuals, but there are a small number and it’s a challenge to find Tier 1 instruments,” he said. For a report on the second panel, see the related story inNews Now, “Interchange, board governance and more focus of global leaders panel.

Session highlights CU business successes at The 1

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LAS VEGAS (7/14/10)--“As our business lending department continues to grow, we continue to work closely with our marketing and business development department,” said Sandi Carangi, vice president of marketing and business development at Erie (Pa.) FCU. The marketing folks have access to all the competitive intelligence the business lenders need.
Click to view larger imageSandi Carangi, at podium, vice president of marketing and business development at Erie (Pa.) FCU, discusses how her credit union handles member business loans, while Scot Hadden, vice president of business banking for Servus CU in Alberta, Canada, looks on. They were presenters at the Monday afternoon business-lending session at The 1 CU Conference in Las Vegas. The conference, presented by the Credit Union National Association and the World Council of Credit Unions, ends today. (Photo provided by the World Council of Credit Unions)
Carangi, along with Scot Hadden, vice president of business banking for Servus CU in Alberta, Canada, were presenters at the Monday afternoon business-lending at The 1 CU Conference in Las Vegas. The conference, presented jointly by the Credit Union National Association (CUNA) and the World Council of Credit Unions, ends Wednesday. Carangi said her credit union’s business-loan portfolio should be about $10 million by the end of this month. About half of Erie FCU’s business loan volume comes through its credit union service organization. Her credit union has opened 217 business accounts during the past year with an average balance of over $2 million in deposits, she said. “It’s not clear yet how legislation will affect interchange fee income, but right now interest income on business debit and credit cards is very strong,” she said, referring to the interchange provision in the regulatory reform bill before Congress. The provision would allow the Federal Reserve Board to set interchange fees, a provision credit unions and CUNA strongly oppose. Hadden said his credit union has offered business services for many years. It has a mature business services department, with a $3 billion business loan portfolio and 200 employees dedicated to business services. He offered these keys to business-services success:
* Fast--Most small-business owners aren’t blessed with patience, so don’t be bureaucratic. * Competitive--The market is smart, but you don’t have to have the lowest fees and rates. * Flexible--If a deal is strong, your terms should be flexible. * Advisory--Make it your business to know their business. * Relationship-based--This is the most important one and is the key to success in business banking. Visit your businesses and take interest in them and their business. Smile, relax, and have fun. Go the extra mile for your businesses and over a full package of services. * The employer of great people--There are a lot of people out there who have the tech skills to do business lending, but you need sales and relationship skills. * Involved in your community—Be visible and support other small, nonprofits.

CU takes fin ed to prison inmates

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OKLAHOMA CITY (7/14/10)--Tinker FCU (TFCU), Oklahoma City, is teaching financial education to prison inmates to help them become financially sound when they are released. Cynthia Campbell, TFCU assistant vice president and manager of the credit union’s Financial Empowerment Program, has conducted workshops at two minimum-security prisons in Oklahoma for prisoners who are within one year of being released. “I’m not sure I would ever have thought to pursue these channels, but after conducting workshops at two minimum-security prisons at the request of the Department of Corrections, I can’t think of any group who needs it more,” Campbell said. At Clara Waters Community Corrections Center, a men’s facility, she presented “Building a Better Budget” and “Understanding Credit” to 30 inmates. At Hillside Community Corrections, a women’s facility, she presented the same topics to 37 inmates. “They are making plans for how to reintegrate into their family life and society,” Campbell said. “They have all the same concerns everyone else has, like how they’re going to pay their bills and make a living.” She said that the inmates were “a gracious audience” and several were TFCU members. Since being incarcerated, their only means of conducting financial business is by phone. Inmates said member service representatives at TFCU always treat them respectfully. “I learned that incarceration is hard on the soul,” Campbell added. “Many of these people were depressed. Just the fact that TFCU cared enough to show up and take an interest in them, teach them and give them a free pen made their entire week.” TFCU has presented financial education workshops to teens in a drop-out recovery program, the Supporting Kids in Independent Living program, and those in the Department of Human Services system who are about to “age out” of the system when they turn 18. “They need advice on how to get a job, maintain a budget and manage checking account,” Campbell said. “Our goal in providing free financial education is to help people, and we love to bring that sort of knowledge to teens who probably won’t get it anywhere else.” The credit union has presented roughly 443 financial education workshops to more than 10,000 children and adults in 2009, and is on track to exceed those numbers this year. TFCU has more than $2 billion in assets.

CUNA signs licensing agreement with NCBA

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MADISON, Wis. (7/14/10)--The Credit Union National Association (CUNA) has signed a formal licensing agreement with the National Cooperative Business Association (NCBA), the national U.S. membership association representing cooperatives, to provide customized professional development training to its members. “This partnership gives CUNA and the NCBA the opportunity, through education, to demonstrate the power of the cooperative community working together,” said Bill Cheney, CUNA president/CEO. “Together,
The Credit Union National Association (CUNA) signed a licensing agreement with the National Cooperative Business Association (NCBA). Pictured are, left, Bill Cheney, CUNA president/CEO and Paul Hazen, NCBA president/CEO. (Photo provided by CUNA)
we are making key components available to a wider swath of the leadership of the cooperative community--which strengthens both of our organizations and the cooperative movement generally.” Through its comprehensive education, co-op development, communications, public policy, and member services programs, NCBA helps co-ops strengthen their businesses so they can better serve their members, and provides a unified voice on Capitol Hill. Dedicated to both domestic and international cooperative development, NCBA works to develop co-ops in the U.S. and abroad. NCBA’s membership includes all types of cooperatives across all industries--consumer, producer, shared services and worker-owned co-ops, NCBA and CUNA said in a joint release. “This agreement allows cooperatives without access to professional educational content to further educate their volunteers with the programs CUNA has developed,” said Paul Hazen, president/CEO of NCBA. “This joint effort will reinforce the service value the NCBA brings to our membership.”

Texas CU league Brazil sign international partnership

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FARMERS BRANCH, Texas (7/14/10)--About 100 representatives from the Texas and Brazil credit union movements Sunday witnessed the official signing of a “People to People” partnership agreement between the Texas Credit Union League (TCUL) and the Confederação Interestadual das Cooperativas Ligadas ao SICREDI (SICREDI), a trade association for 128 Brazilian credit unions, and one of Brazil’s leading credit union organizations. The signing took place at The 1 Credit Union Conference in Las Vegas, and brings the number of World Council of Credit Unions (WOCCU) partnership programs to 26 (LoneStar Leaguer July 13). The partnership allows dialogue and the exchange of ideas and best practices between Texas credit unions and counterparts in Brazil, Ensweiler added. “We are enthusiastic about solidifying a partnership with SICREDI,” said TCUL President/CEO Dick Ensweiler. “While they are a relatively young movement, they are quite sophisticated. I’m extremely impressed with the level of cooperation that exists between SICREDI’s member credit unions, and I’m confident that this will be a mutually beneficial relationship.” The partnership will kick off tomorrow, when about 25 SICREDI staff will visit Members Trust of the Southwest FCU in Stephenville, followed by a tour of a 3,300-plus head dairy farm. Agricultural cooperatives are very strong in Brazil, and many credit unions in Brazil started out serving farmers, TCUL said. Collaboration will continue in September, with a four-week visit by 11 SICREDI staff to TCUL and its member credit unions, to get a better sense of how U.S. credit unions approach operational, marketing and member service issues. The visits will be reciprocated at some point in the future with a visit by TCUL staff and members to SICREDI’s office and operations in Brazil. "There is always room for learning from others, and we expect there to be a lot of idea-sharing and exchanges that will make all of our credit unions even better,” said Manfred Dasenbrock, chair of SICREDI and a member of WOCCU’s board of directors who participated in the agreement signing. “We look forward to working with the league and Texas credit unions.” TCUL also maintains a partnership with the Jamaica Credit Union League.

CDCU opens green branch in San Francisco

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SAN FRANCISCO (7/14/10)--Residents of San Francisco's South of Market (SOMA) neighborhood, have a new financial institution to assist them now that Northeast Community FCU (NECFCU), a $10 million-asset community development credit union (CDCU) serving more than 1,650 members, has opened its fourth retail location.
Northeast Community FCU (NECFCU), San Francisco, a $10 million-asset community development credit union (CDCU) serving more than 1,650 members, has recently opened its fourth retail location. (Photo provided by the National Association of Community Development CUs)
Located in a “green” building on the corner of Howard Street and Sixth Street, the SOMA branch is NECFCU’s latest endeavor to expand service to a community in desperate need of accessible and reliable financial services. San Francisco’s Sixth Street corridor is a mixed-use community. The area is characterized by high rates of homelessness and drug use, which has led to large numbers of vacant ground-floor commercial spaces; a prevalence of older residential and commercial buildings, including many single-room occupancy hotels; and a dearth in regulated financial service providers, with check cashers, payday lenders, pawn shops and loan brokers among the most widely available financial institutions in the community. Over the years, residents, developers and local businesses approached NECFCU encouraging the credit union to open a SOMA branch, but none of the commercial street-front locations available were suitable for a credit union. “We had many members and SOMA residents who requested that we open a convenient branch in the area to offer basic financial services,” explained Lily Lo, CEO/manager of NECFCU. “Before the opening of the SOMA branch, the neighborhood had no banking facilities in the area, and members in the community were forced to use check-cashing and loan services that charged exorbitant fees.” It wasn't until 2006 that Northeast Community FCU would find its SOMA home, with the completion of Plaza Apartments, the city’s first totally “green” low-income housing project for SOMA residents. Despite identifying a suitable location, it would take another four years before the credit union's SOMA branch would open for business. “After years of effort, and with extensive assistance from our partners and colleagues, there is now a responsible alternative to meet the community's financial needs,” Lo said. Special recognition was made to Patelco CU, a San Francisco-based $4-billion-asset credit union that has been one of Northeast Community FCU’s strongest supporters over the years, assisting with the development of the CDCU's branches in the Tenderloin, Visitacion Valley, and now SOMA; and providing each of those locations with Patelco ATMs, which the CDCU members can use for free. “As a community development credit union, Northeast Community is on the front lines in serving the low-income and underserved residents of San Francisco,” said Barry Kane, Patelco senior vice president of operations. “It continues to be an honor for Patelco to support the efforts of Northeast Community FCU in reaching out to these populations.” Representatives from several San Francisco credit unions also attended, including Patelco CU; Spectrum CU; SF Fire CU; SF Police CU; and Mission SF FCU--the only other CDCU in San Francisco--serving the predominantly Latino Mission neighborhood.

Convention panel outlines how interchange provision will affect CUs

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LAS VEGAS (7/13/10)--The interchange provision of the federal regulatory reform bill in Congress exempts small credit unions, but they would still be impacted directly by how the Federal Reserve Board would proceed in setting rates in the next nine months, said a panel in a breakout session at The 1 Credit Union Conference Monday in Las Vegas. The joint conference presented by the Credit Union National Association (CUNA) and the World Council of Credit Unions (WOCCU) ends Wednesday.
Click to view larger imageCO-OP Financial Services CEO Stan Hollen (at podium) outlines how the interchange provision of the regulatory reform bill would impact credit unions at a breakout session Monday morning at The 1 Credit Union Conference in Las Vegas. Other members of the panel are, from left, Mary Dunn, Credit Union National Association (CUNA) associate general counsel, and Ryan Donovan, CUNA vice president of legislative affairs. (Photo provided by the World Council of Credit Unions)
In the session, “How Interchange Will Affect Your Credit Union,” the panel included Stan Hollen, president/CEO of the CO-OP Financial Services; Mary Dunn, CUNA associate general counsel; and Ryan Donovan, CUNA vice president of legislative affairs. Donovan described the grassroots efforts credit unions conducted against the provision, which would allow the Federal Reserve Board to set rates for interchange transactions. The combined grassroots power of credit unions and community banks caught legislators off guard, he said. “The provision was not envisioned as part of the regulatory reform bill, as initially envisioned by the Obama administration. It would be a shame if Wall Street’s actions would result in legislation aimed at protecting the consumer but instead resulting in the end of free checking and transaction fees,” he said.
The grassroots operation delivers three messages, he added:
* Congress has not thoroughly studied the provision; * The interchange provision will have a disproportionate effect on small issuers; and * Consumers lose if the measure is enacted.
Hollen praised CUNA for its role in negotiations on the provision. “The positive changes that occurred in the negotiations were not made by the banks or payments network associations,” he said, noting that “CUNA made the right decision” in opposing the bill. Credit unions will need to manage their interchange income by increasing the penetration of accounts, by offering free analytics to encourage more members to use debit cards, and reviewing the value of point of sale networks. “If you use multiple channels, the merchant will pick the lowest-cost channel,” Hollen told the group, Dunn noted the provision would change the way interchange is dealt with for the first time. “It exempts small issuers (such as credit unions) but it doesn’t exempt small issuers from the impact of regulation,” she told session attendees. Areas to be regulated include interchange rates; rules to prevent the evasion of the amendment, which could “hurt or help us”; fraud-related standards; network fees; and exclusive arrangements, Dunn said. The Fed would set the rates for large issuers and is not required to write rates for small issuers, but the deadline facing the Fed will make sure the Fed looks only to large issuers. But, Dunn said, the Fed doesn’t have to set the fees but must make sure rates set by the networks are reasonable and proportionate. CUNA and the leagues are addressing the issues, encouraging supportive statements from key lawmakers, meeting with the Fed, studying possible litigation, expanding CUNA’s Working Group on the matter, and working with partners, Dunn said. CUNA will ensure exemption is meaningful and that it avoids unintentional consequences and preserve interchange income to the extent possible, Dunn concluded.