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Four Hill UIGEA proponents question implementation

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WASHINGTON (7/30/08)—Four House members who were proponents of the Unlawful Internet Gambling Enforcement Act as it made its way into public law have sent a joint letter to the Treasury Secretary and Federal Reserve Board chairman questioning implementation. The U.S. Treasury Department and Fed are charged with implementing the provisions of UIGEA. Recently, the House Financial Services Committee narrowly voted down the Payment System Protection Act (H.R. 5767), which would have forced the agencies to set aside their current proposal to implement the Internet gambling prohibitions. Under the law, financial institutions must establish and implement policies and procedures to identify and block restricted transactions, or rely on those established by the payments system. Opponents of the proposed rules, including the Credit Union National Association (CUNA), argue that they lack clarity and sufficient definition of terms, and that they would represent an impossible compliance burden for credit unions and other financial institutions. The lawmakers’ letter raised some of the same concerns. “As proposed, those regulations do not provide clear guidance to the public, in particular those that engage in online skill games, or regulated industries regarding what constitutes unlawful internet gambling,’” said the letter signed by Reps. Judy Biggert ( R-Ill.), Christopher Shays (R-Conn. ), Jim Gerlach (R-Pa.), and Kevin McCarthy (R-Calif.). All signers are members of the House Financial Services Committee. The lawmakers reiterated that they voted for UIGEA and “support it now.” “However,” they wrote, “we are concerned about the legal and operational viability of a rule that leaves so much to interpretation and, accordingly, urge the Board and Treasury to take a more deliberative path to a workable rule…”

Broader incidental powers plan needed says CUNA

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WASHINGTON (7/30/08)—The National Credit Union Administration (NCUA) should implement its three proposals to expand the definition of incidental powers for federal credit unions, but it should also go further than its current plan, according to the Credit Union National Association (CUNA). CUNA, commenting on an NCUA proposed rule that would add illustrations of permissible activities under the categories of correspondent services, operational programs, and finder activities, said it supports the agency plan as far as it goes. However, CUNA wrote in a July 28 comment letter, the NCUA and Office of the Comptroller of the Currency (OCC) use the same three-part test to determine appropriate incidental powers, but the OCC has been more liberal in according incidental powers than has been the NCUA. The federal credit union regulator should therefore use its interpretative authority to determine incidental powers for credit unions in a manner more consistent with OCC's incidental powers determinations. CUNA also urged the NCUA to allow for federal credit unions any state-authorized incidental powers in their state of operation, as long as the activity has not been prohibited by the Federal Credit Union Act. Additional new incidental powers recommended by CUNA include allowing federal credit unions to:
* Accept pre-paid funeral home accounts under the trustee or custodial services category; and * Manage repossessed residential properties for other credit unions.
CUNA also continues to encourage the NCUA to authorize a foreign currency investment pilot program as CUNA recommended in an October 2007 comment letter. The NCUA routinely examines one-third of its body of regulations each year to determine if any improvements can be made. The incidental powers proposal was the result of this routine look. Use the resource link below for more information on the NCUA incidental powers proposal.

Hood finds notable initiatives in Chinese system

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ALEXANDRIA, Va. (7/30/08)—National Credit Union Administration (NCUA) Vice Chairman Rodney Hood said a remarkable fact he uncovered during a recent official trip to Beijing was that, through the outreach efforts of the Chinese banking regulator, nearly every person in China has an account with a financial institution. Hood met with Jiang Dingzhi, vice chairman of the International Department for the Chinese Banking Regulatory Commission (CBRC). The purpose of the meeting was to gain a broader understanding of the Chinese financial system and to share best practices of financial regulation. Hood also inquired about a new initiative that he said is of special interest to him; a microcredit pilot program being considered in one Chinese province. Hood said that to facilitate the needs of small businesses, the Chinese government is looking to debut microcredit companies in the Zhejiang province that will provide loans to small and medium-sized enterprises. Also during the meeting, Hood outlined the role of NCUA and the importance of the credit union system in helping underserved American’s attain financial security and ultimately achieve the “American Dream” of homeownership. Hood also noted the importance of financial literacy and how credit unions are making that a reality through required education programs that teach members how to manage money. Hood extended an invitation for Dingzhi to visit the NCUA the next time he is in the United States.

Hyland stresses ALM third party due diligence

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WASHINGTON (7/30/08)—Credit unions in today’s economy should pay special attention to asset-liability management and third-party due diligence, advised National Credit Union Administration (NCUA) Board Member Gigi Hyland in remarks this week to the Metropolitan Area Credit Union Association, a group of Washington, D.C.-area credit unions. Today about half of credit union assets are in real estate lending, often supported with more volatile shorter-term deposits. The combination underscores the importance of asset-liability management, said Hyland, calling this one of NCUA’s “hot examination issues.” A second hot issue is third-party due diligence, one Hyland recalled was a concern back when she was a private-sector attorney and saw too many credit union clients prepared to sign contracts that would have left them with excessive liability. She urged credit unions to read NCUA’s December 2007 letter to credit unions and the agency’s AIRES questionnaire on due diligence, and watch the webinar she hosted on this subject earlier this year which included and series of frequently asked questions on this subject, all available on the agency’s web site, www.ncua.gov. One the executive compensation recommendations of NCUA’s Outreach Task Force, which Hyland chaired, she said further action is awaiting a review by the agency’s new chairman, Michael Fryzel, and the full NCUA board “to evaluate how we go forward with that.” CUNA opposes the executive compensation disclosures called for by the task force, arguing they are unnecessary. With the housing bill now passed by Congress and on its way to the president, Hyland was asked if the agency is considering a letter to credit unions on its possible impact, specifically whether the legislation’s Federal Housing Administration loan workout provisions intended to stem foreclosures may force more second-mortgage lenders, such as credit unions, to walk away from home equity loans. “We need to see what the final bill looks like and what type of regulatory guidance we might issue in conjunction with the FFIEC [Federal Financial Institution Examination Council],” Hyland responded.

Inside Washington (07/29/2008)

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* WASHINGTON (7/30/08)--Critics are arguing that top executives at Fannie Mae and Freddie Mac should step down from their positions because the government had to step in and rescue the enterprises (American Banker July 29). Mistakes can be traced by to the companies’ CEOs, according to Bert Ely, an independent analyst in Alexandria, Va. Thomas Stanton, a fellow at the National Academy of Public Administration, said the CEOs needed to take longer-term perspectives in managing the enterprises, instead of concerning themselves with just the quarterly reports. Others say Fannie’s CEO, Daniel Mudd, and Freddie’s CEO, Richard Syron, could not control the circumstances that led to the enterprises’ downfall. At a hearing on the enterprises two weeks ago, Henry Paulson, Treasury secretary, said he is grateful for the service the enterprises’ management is providing ... * WASHINGTON (7/30/08)--Regulators pushed for the use of covered bonds by financial institutions during a press conference Monday. The bonds can increase mortgage financing, strengthen financial institutions by providing funding and improve underwriting standards, said Treasury Secretary Henry Paulson. Bank of America, Citigroup, Wells Fargo and JP Morgan Chase and Co. said they would issue covered bonds soon. Bank of America is the only one who has offered the bonds in the U.S., while Washington Mutual has offered them overseas. Covered bonds are used to fund assets that remain on a balance sheet when banks sell their loans to be packaged into securities. The bonds could prevent mistakes that triggered the housing crisis, regulators said ...

Fryzel sworn in as NCUA chairman

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Click to view larger image NCUA Board nominee Michael Fryzel before his June 3 Senate Banking Committee hearing on Capitol Hill. (Photo provided by CUNA)
CHICAGO (7/30/08)--Michael E. Fryzel became chairman of the National Credit Union Administration (NCUA) yesterday in Chicago, said the agency in a release. The Honorable Lee Preston, Judge of the Cook County Circuit Court and longtime friend of Fryzel, administered the oath of office at 12 p.m. CT. “I am grateful to the president for this opportunity to serve,” said Fryzel in a statement. “To be the NCUA chairman is a tremendous honor and I pledge to work to the best of my ability to fulfill the trust that has been placed in me.” Fryzel last month reiterated his priorities as NCUA chairman: "vigilant and thorough supervision, emphasis on safety and soundness, and dedication to protecting the consumer." "The credit union industry, now entering its second century, has proven itself valuable to America's consumers and as such has a right to expect fair, consistent, common-sense regulation," he said. "It is my commitment to conduct my chairmanship in that manner."