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Inside Washington (07/04/2011)

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ALEXANDRIA, Va. (7/5/11)--Noting that "overcoming the effects of the economic downturn remains a challenge for most credit unions," National Credit Union Administration (NCUA) Chairman Debbie Matz last week said that NCUA examiners "are working diligently with credit union management and boards to mitigate existing and potential risks to maintain stable balance sheets." Matz, in the agency's most recent report on the state of the credit union industry (11-CU-07) also previewed some of the agencies supervisory priorities going forward. The NCUA chairman noted that credit risk, which "continues to constrain many credit unions' performance," will remain a focus of examinations this year. Matz said that real estate, business, and participation loan delinquencies "remain elevated," and "real estate and business loan modifications have increased." Credit unions should closely monitor any loan modifications in their portfolio, she said. Interest rate risk and concentration risk should also be closely monitored by credit unions, and the NCUA will "continue to take proactive steps to protect the safety and soundness of the credit union industry," Matz said ... ALEXANDRIA, Va. (7/5/11)--The National Credit Union Administration (NCUA) for the second consecutive day expanded the scope of its disaster relief policy as flooding continued to threaten parts of Missouri. The agency on June 30 expanded its policy after severe weather and flooding impacted areas of Montana, Nebraska, Indiana, Kansas and Iowa. The NCUA in recent months has also reached out to aid credit unions and members in North Dakota, Tennessee and Minnesota, and the southeast. The agency's disaster relief policy is intended to assist credit unions and their members to deal with potential losses, and allows for altered loan terms for members and guaranteed lines of credit for some credit unions ... WASHINGTON (7/5/11)--National banks should conduct a self-assessment of foreclosure management practices by Sept. 30, the Office of Comptroller of Currency (OCC) said in guidance issued Thursday. The self-assessments should include testing and file reviews and be appropriate in scope, considering the level and nature of the bank's mortgage servicing and foreclosure activity, the OCC said. In the fourth quarter of 2010, the OCC, the Federal Reserve, the Federal Deposit Insurance Corp., and the Office of Thrift Supervision conducted reviews of foreclosure processing at 14 federally regulated mortgage servicers. The agencies found weaknesses in servicers' foreclosure governance processes, foreclosure documentation preparation processes, and oversight and monitoring of third-party vendors, including attorneys. As a result, the OCC is advising banks to review their foreclosure policies to ensure that they treat borrowers fairly and are in compliance with foreclosure laws. Banks can expect regulators to conduct a thorough review of these self-assessments the next time they are examined, the OCC said ... WASHINGTON (7/5/11)--Observers questioned the public nature of a letter sent by the Treasury Department to Office of the Comptroller of Currency (OCC) criticizing the OCC's pre-emption plan (American Banker July 1). Critics say the public critique violated the spirit if not letter of the law prohibiting the administration from delaying or derailing rulemaking. Bob Clarke, a former comptroller and a senior partner with Bracewell & Giuliani LLP, suggested it would have been more appropriate for Treasury to speak with the OCC rather than issuing a public comment letter. While the OCC is nominally under the Treasury Department, it is an independent agency with a leader appointed by the president and confirmed by the Senate. Donald Lamson, a former OCC official and a partner with Shearman & Sterling LLP, said it appears as if there was a lack of communication between the two agencies. Conversations, both formal and informal, are part of the rulemaking process, Lamson said ... WASHINGTON (7/5/11)--Capital rules written for large banks may also apply to small institutions, Federal Deposit Insurance Corp (FDIC) Chairman Sheila Bair said during a Senate Banking Committee hearing Thursday. Bair, who will leave the FDIC Friday, also defended prompt corrective action in the face of an oversight report criticizing it (American Banker July 1). While the quality of capital definitions of Basel III was created for global banks, Blair said they should apply to banks of all sizes. "The competitive position of small and mid-sized institutions has been steadily eroded over time by the government subsidy attached to the Too Big to Fail status of the nation's largest banks," Bair said. "In the first quarter of this year, the cost of funding earning assets was only about half as high for banks with more that $100 billion in assets as it was for community banks with assets under $1 billion" ...

CUNA releases interchange rule analysis (07/04/2011)

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WASHINGTON (7/5/11)--The Credit Union National Association has released a final rule analysis of the Federal Reserve's final debit interchange fee and routing regulations. The Fed's final rule, which was released last Wednesday, would cap large issuer debit interchange fees at 21 cents, to cover network connectivity, hardware, software, and labor costs, as well as costs related to network processing and transaction monitoring. An additional five basis points per transaction may be charged to cover fraud losses. A separate interim final rule proposed would allow an additional penny to be charged if financial institutions are in compliance with Fed established fraud prevention standards. Debit card issuers with less than $10 billion in assets are exempt from the direct impact of the cap provisions. Prepaid cards and government-issued cards are also exempted. The final rule will also require issuers to provide a debit card that can be processed on at least two unaffiliated card networks, such as one signature network and one unaffiliated PIN network. Alternatively, issuers may also provide a debit card that can be processed on two or more unaffiliated signature networks, but not on any PIN networks, or that can be processed on two or more unaffiliated PIN networks, but not on any signature networks. The final rule also prohibits issuers and payment card networks from limiting merchants' ability to choose the network on which a transaction is routed, limited to those networks on which the debit card is enabled to be used. For the final rule analysis, use the resource link.

CUNA to CFPB Consider CUs as rules are written (07/04/2011)

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WASHINGTON (7/5/11)--The Credit Union National Association (CUNA) has called on the Consumer Financial Protection Bureau (CFPB) to consider the differences between member-owned financial cooperatives such as credit unions and for-profit banks that put the interests of their shareholders first as it develops and amends rules. CUNA's Deputy General Counsel Mary Dunn reiterated to the CFPB that credit unions are quite concerned about the rising tide of regulations under which credit unions must operate. She urged the agency to look for ways to minimize those requirements. She added that credit unions support reasonable consumer protections but the regulatory burden on financial institutions that seek to meet consumers' financial needs must be reasonable as well. The CFPB will oversee regulations addressing lending, savings, and consumer privacy when a number of consumer protection laws such as Truth in Savings are moved from the Federal Reserve, the National Credit Union Administration, the Federal Deposit Insurance Corp., and other regulators later this month for implementation by the CFPB. The Truth in Lending Act (TILA), Equal Credit Opportunity Act, most provisions of the Electronic Fund Transfers Act and others are also on the CFPB's regulatory agenda. Nineteen laws are scheduled to come under the CFPB's oversight in late July. CUNA in a comment letter to the CFPB said that it does not take issue with the CFPB taking on oversight of these rules. CUNA did, however, urge the CFPB to refrain from imposing new rules on credit unions. The letter also commended the CFPB for its approach to streamlining TILA and Real Estate Settlement Procedures Act (RESPA) forms. The CFPB is working to integrate the various TILA and RESPA disclosures into a single document comprehensible by consumers. This integration will be achieved by a multi-stage revision process through which the CFPB will release five separate, consecutive versions of its merged mortgage disclosure form. New sample forms will be released about once per month between now and September. A single draft disclosure will then be developed. The CFPB is currently in the second stage of this process. CUNA, leagues and credit unions have been actively involved in working with theCFPB on this project and in May met with the CFPB to discuss the first stage of the streamlining process. Additional meetings are in the works. CUNA urged the agency to continue to reach out to stakeholders as it moves forward.

NCUA announces July 11 corporate prepayment plan webinar (07/04/2011)

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ALEXANDRIA, Va. (7/5/11)--The National Credit Union Administration (NCUA) has officially announced that it will host a free webinar on its voluntary Corporate Stabilization Fund assessment prepayment plan on July 11 at 2 p.m. ET. The webinar will be moderated by NCUA Chairman Debbie Matz, and will also feature input from NCUA Deputy Executive Director Larry Fazio, Examination and Insurance Director Melinda Love, Chief Economist John Worth, and staff attorney Lisa Henderson. The agency in a release said the webinar will give credit union industry insiders and public stakeholders the chance to improve their understanding of the prepayment program. The NCUA last week unanimously voted to move forward with a plan to allow credit unions, on a voluntary basis, to prepay their Corporate Stabilization Fund assessment. The agency has set the target size of the program at $500 million, which will result in a reduction of the 2011 regular assessment from 24.9 basis points (bp) to 18.5 bp. The NCUA will not move forward with the plan if less than $500 million is pledged by credit unions. Matz emphasized that participation in the prepayment plan is voluntary, and said that the agency is neither encouraging nor discouraging credit union participation in the program. The Credit Union National Association has encouraged credit unions to consider the extent to which the program will benefit them and whether they should participate. Credit unions that wish to take part in the prepayment plan must submit a completed program agreement to the NCUA by July 29. The agency will tally the total amount of credit union commitments on Aug. 9, and, if it moves forward with the plan, will debit the amounts that have been pledged from credit union accounts on Aug. 18. For more on the webinar, and prior coverage of the NCUA's recent corporate prepayment plan actions, use the resource links. The NCUA last week also announced that it will hold a special closed board meeting on Aug. 29. A full agenda for that meeting has not yet been released.

Cheney to NCUA Amend corporate prepayment plan (07/04/2011)

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WASHINGTON (7/5/11)--Credit Union National Association (CUNA) President/CEO Bill Cheney has suggested that the National Credit Union Administration (NCUA) amend its corporate credit union assessment prepayment program to allow total prepayments of as much as $1 billion and apply all prepayments to a reduction in 2011 fund assessments. In a Friday letter to the agency, Cheney noted that credit unions have said that they are disappointed by the NCUA's decision to limit the Temporary Corporate Credit Union Share Insurance Fund (TCCUSF) plan to only $500 million in prepayments. Doing so would reduce the 2011 TCCUSF assessment by 6.4 basis points (bp), and member credit unions have told CUNA that "at that level, it's just not worth it," Cheney said. Cheney suggested that 2011's assessment could be further reduced if the agency made better use of the TCCUSF's $6 billion line of credit from the U.S. Treasury. "If the agency would be willing to allow the balance at Treasury to remain as high as $5.5 billion through 2013, the prepayment plan could be allowed to rise to $1 billion, and this year's assessment could be reduced by as much as 13 bp," Cheney said. The CUNA CEO added that Treasury officials have been "supportive" of using the borrowing authority "to even out assessment expenses for credit unions." The NCUA's prepayment plan, which was approved at last Wednesday's special open board meeting, would allow credit unions to prepay some TCCUSF assessments. The agency has set the target size of the program at $500 million, and the program will not be implemented if less than $500 million is committed. Credit unions may commit a maximum of 48 bp of their total insured shares as of March 31, 2011 to the fund. The NCUA will cover additional details of the plan at a July 11 webinar. (See related story: NCUA announces July 11 corporate prepayment plan webinar) For the full letter, use the resource link.