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Compliance Know your share insurance rules

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WASHINGTON (8/18/08)—With the country’s financial markets in turmoil, more and more Americans are asking questions about federal share insurance coverage to determine if their money is safe. The Credit Union National Association’s (CUNA’s) August Compliance Challenge poses several questions that deepen credit unions’ understanding of how insurance works. For instance, the Challenge notes in one question that there is no “qualified beneficiary” distinction for irrevocable trust account beneficiaries. Such beneficiaries do not have to be a spouse, child, grandchild, parent or sibling. Another question clarifies that the National Credit Union Administration (NCUA) has adopted the definition of “marriage” and “spouse” found in the Defense of Marriage Act (HR 3396). Under the Act, “marriage” is defined as a legal union between one man and one woman and “spouse” refers only to individuals of the opposite gender. Therefore, the Challenge notes, same-sex partners united in states permitting same-gender unions may not be named as a ”qualified account beneficiary” who would thereby be entitled to separate share insurance coverage up to $100,000. And in a third related question, the CUNA compliance experts ask (and answer): How should account cards be titled to ensure proper share insurance coverage for “Payable on Death” (POD) and Living Trust Accounts? The answer: In the case of POD accounts, if the POD line or lines are filled in on the account card, the account is insured separately as a “revocable trust” with each qualified beneficiary, as defined above, being entitled to share insurance coverage up to $100,000. The account doesn’t have to be specifically titled as a “POD” and no trustees would be listed. In the case of a living trust account, the NCUA’s ‘How Your Accounts Are Insured” booklet states: “Credit unions can establish a common revocable trust payable-on-death (POD) account without additional documentation; however, some trusts require additional, valid documentation to qualify for coverage.” For more information on this issue, the above questions, and many other challenges in the compliance world, use the resource link below to visit CUNA’s Compliance Challenge.

CUNA GAO interchange study should look at small FI issues

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WASHINGTON (8/18/08)--The Credit Union National Association (CUNA) has suggested a series of questions with specific relevance to credit unions that should be explored as part of a Government Accountability Office (GAO) study on interchange fees that was requested recently by three U.S. Senators. “These questions focus on the challenges small card-issuing financial institutions face in working with the card networks to ensure interchange is balanced to support their continued administration of card programs,” explained CUNA President/ CEO Dan Mica in a letter to Sens. Tom Harkin (D-Iowa), Benjamin Cardin (D-Md.) and Olympia Snowe (R-Maine). Last month the three senators asked the GAO to study the interchange issue to help them better assess pending legislation that would regulate interchange rates. Questions that CUNA suggested the GAO consider include:
* How small institutions, such as credit unions, would offset costs if interchange were capped by regulation or legislation; * How new restrictions would affect small institutions’ ability to offer credit and debit cards; * What options do small financial institutions have to increase the interchange fee associated with merchant card acceptance; and * How the ability of merchants to negotiate interchange affect card acceptance and competitive balance in the marketplace?
The Credit Card Fair Fee Act (H.R. 5546) has passed the House Judiciary Committee and a companion bill, S. 3086, has been introduced in the Senate. CUNA opposes the legislation, saying it would adversely affect consumer options, competition and technology innovation. Use the resource link below for the full text of CUNA’s Aug. 14 letter.

Inside Washington (08/15/2008)

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* WASHINGTON (8/18/08)--The Community Development Financial Institutions (CDFI) Fund is offering application tutorials through webcasts for individuals unable to attend in-person application workshops ... * WASHINGTON (8/18/08)--The “too big to fail” problem has gotten worse, Gary Stern, president of the Minneapolis Federal Reserve Bank and voting member of the Federal Open Market Committee, said in a speech Thursday. “Too big to fail” refers to large banks with fewer incentives to practice business soundly because they expect to be bailed out in the event of a failure (MarketWatch Aug. 14). Regulators need to limit spillovers from the failure of a systematically important institution through stress tests, Stern said. They also should rely on indicators such as subordinated credit spreads, or credit default spreads, instead of a bank’s asset value ... * WASHINGTON (8/18/08)--The Federal Deposit Insurance Corp. (FDIC) is set to release its Quarterly Banking Profile with second-quarter earnings for banks and thrifts Aug. 26 (American Banker Aug. 15). The FDIC reported in May first-quarter net income for banks and thrifts at $19.3 billion, down 46% from a year earlier. The profile will also include a list of “problem banks.” In the first quarter, 90 banks and thrifts were on the list ... * WASHINGTON (8/18/08)--Newly originated loans to borrowers in “high cost” areas as defined in the Housing and Economic Recovery Act of 2008 will qualify for incorporation into To-Be-Announced (TBA) eligible mortgage-backed securities, the Securities Industry and Financial Markets Association (SIFMA) announced Thursday. Higher balance loans may comprise 10% of the total balance of a pool eligible for TBA delivery to minimize liquidity disruption in the market, SIFMA said. The association also recommends that higher-balance mortgages be pooled separately ...