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Inside Washington (08/31/2009)

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* ALEXANDRIA, Va. (9/1/09)—The National Credit Union Administration (NCUA) has sent out a follow-up communication to its fraud alert last week regarding a bogus Letter to Credit Unions that itself masqueraded as an NCUA fraud alert. The false alert, the NCUA said, appears to be confined to the activity of a single credit union. According to the agency, as part of an internal "system penetration" test, a credit union created a facsimile of an NCUA Fraud Alert. “This was an unauthorized and improper use of the NCUA logo, and also included a falsified signature of then-Chairman Michael Fryzel,” NCUA said. The bogus alert was forwarded to the NCUA and that prompted the issuance of the Aug. 25 Fraud Alert. Credit unions are not authorized to create facsimile documents bearing NCUA logos or signatures, or to improperly represent communications from NCUA, even during the legitimate conduct of business such as a computer security assessment. The NCUA said it takes any type of security breach very seriously. "We also place a high priority on making federally insured credit unions aware of any illegal, fraudulent or deceptive activities that are frequently aimed at financial institutions. NCUA vigilance in this important area will continue, as will our efforts to make certain that credit unions take all proper precautions to protect sensitive member information and maintain financial security.”… * WASHINGTON (9/1/09)--Taxpayers should start to see profits as big banks repay their government bailout funds (The New York Times Aug. 31). Eight of the nation’s largest banks have completely repaid their bailouts, amounting to about $4 billion in profits, the newspaper said. The government also earned profits of $1.4 billion from Goldman Sachs, $1.3 billion from Morgan Stanley and $414 million from American Express when they repaid their bailouts. Bank of New York Mellon, State Street, U.S. Bancorp, BB&T, and Northern Trust also helped bring profits ranging from $100 million to $334 million. The repayments represent a small portion of the government’s financial rescue of banks and other companies, but taxpayers could collect more profits as banks repay their debts. When the bailout funds were issued, taxpayers were told they would make a modest return on the bailout funds. Critics had warned taxpayers, saying they may not reap any profits if some banks could take years to repay the money ... * WASHINGTON (9/1/09)--The Federal Deposit Insurance Corp. (FDIC) has agreed to guarantee $80 billion in loans and other assets from more than 50 deals, or “loss shares,” to encourage banks to buy up assets from their failed counterparts. The exposure is about six times the amount remaining in the FDIC Deposit Insurance Fund, according to The Wall Street Journal (Aug. 31). The government has shifted into cleanup mode from financial crisis mode, though its financial burden is not receding, the newspaper said. The FDIC has paid $300 billion so far to banks under loss-share agreements ... * WASHINGTON (9/1/09)--The Federal Deposit Insurance Corp. (FDIC) said Friday that it is extending the “de novo” period for newly insured financial institutions to seven years from three years for exams, capital and other requirements. Typically, newly insured financial institutions are subject to higher capital requirements and more examinations during a de novo period. The FDIC also must approve material changes in business plans for the institutions during the first seven years of operation. The changes address the elevated risk that newly insured institutions pose to the FDIC Deposit Insurance Fund, the agency said ... * WASHINGTON (9/1/09)--The Securities and Exchange Commission (SEC) has been historically slow in its oversight of credit-rating agencies, according to a report by SEC Inspector General David Kotz. In 1994, the SEC began issuing concept releases, conducting exams, issuing reports, conducting hearings and proposing regulations. However, it didn’t adopt any regulations regarding nationally recognized statistical rating organizations. There also are certain instances of non-compliance with requirements of the Rating Agency Act, the report said. However, Kotz stated that the SEC has identified improving the quality of credit ratings as a priority ...

Free Choice members served now by Trumark Financial

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ALEXANDRIA, Va. (9/1/09)-- Trumark Financial Credit Union, a $1.080 billion-asset credit union in Trevose, Pa., will now serve the former members of Free Choice FCU of Feasterville, which was liquidated by the National Credit Union Administration (NCUA) Friday. The NCUA said Free Choice was liquidated to protect member assets while addressing operational issues within the credit union because of a deteriorating financial condition. With shares purchased and assumed by Trumark Financial, former Free Choice members are guaranteed full member-owner rights at TFCU, the NCUA noted in its announcement. Prior to the purchase and assumption, Trumark Financial served 91,000 members in neighboring counties in southeastern Pennsylvania. Chartered in 1955, the liquidated Free Choice had assets of approximately $326,000, and served more than 400 members from 20 select groups.

Joint liquidity rules redundant for CUs says CUNA

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WASHINGTON (9/1/09)—New joint federal regulatory guidance on funding and liquidity risk management makes sense at for banking organizations, but would only be redundant to existing rules for credit unions, the Credit Union National Association (CUNA) said in a comment letter submitted Monday. The CUNA letter addresses proposed interagency guidance issued the National Credit Union Administration (NCUA), Office of the Comptroller of the Currency, Federal Reserve Board, Federal Deposit Insurance Corporation, and Office of Thrift Supervision. The proposed guidance is intended to clarify and summarize principles of sound liquidity risk management previously issued by the agencies. CUNA adamantly supported “robust, ongoing liquidity risk management at all credit unions” in its letter, but delineated a number of reasons why the NCUA should not go forward with the proposed guidance. For instance, CUNA noted, sound liquidity risk management policies and processes already are well covered in the agency’s Examiner’s Guide, “Chapter 13- Part 3, ALM-Liquidity Risk.” All of the key components of the guidance are addressed sufficiently in the examination procedures, including adequate sources of liquidity, contingency planning in the event of liquidity problems, monitoring and reporting on liquidity," noted Mary Dunn, CUNA senior vice president and deputy general counsel, who signed the letter. CUNA also wrote:
* The NCUA has not provided a sufficient rationale for new requirements that would be imposed on federal credit unions; * The proposed guidance attempts to impose uniform liquidity risk management procedures on all financial institutions regardless of size or charter type, while CUNA believes that the proposed guidance is more appropriate for very large banks; * Regarding corporate credit unions, the NCUA already is reviewing the structure of the corporate system and, CUNA pointed out, “any additional requirements for corporate credit unions in this area should be addressed in the context of that review.”
The CUNA letter concluded that it is better for the agency not to go forward with the proposal, but added if NCUA feels it is necessary to address liquidity risk issues, it should develop a Letter to Credit Unions that focuses on specific problems and addresses steps credit unions can take to address them under the agency’s current liquidity risk management requirements. Use the resource link to read CUNA’s complete comments.

FinCEN offers guidance on new CTR exemption rule

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WASHINGTON (9/1/09)—Responding to a Government Accountability Office (GAO) recommendation for more guidance to help financial institutions determine whether a member or customer is eligible for exemption from currency transaction reporting requirements, the Financial Crimes Enforcement Network (FinCEN) Monday issued new Bank Secrecy Act direction. The FinCEN guidance provides examples and answers to commonly asked questions regarding a final rule that went into effect on Jan. 5, and which made the following changes to the CTR exemption system:
* Elimination of designation and annual review for most Phase I customers; * Financial institutions may now designate an otherwise eligible non-listed business customer/member for exemption if it has conducted five or more reportable transactions in currency within a year (previously, eight or more reportable transactions were required); * The waiting time for Phase II eligibility was decreased from 12 months to two months or less than two months if a risk-based analysis of the member's transactions was conducted; and * Biennial renewals for Phase II exemptions were eliminated.
FinCEN’s new guidance includes an easy-to-read chart to help financial institutions establish when a member or customer can be exempt. Use the resource link below to access more information.

NCUA sets Town Hall meetings

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ALEXANDRIA, Va. (9/1/09)—Chairman Deborah Matz of the National Credit Union Administration (NCUA) announced three upcoming Town Hall meetings to discuss corporate credit union and other credit union issues. The meeting schedule:
* Tuesday, Sept. 15, St. Louis, Mo.; * Wednesday, Sept. 30, National Harbor, Md., which is in the Washington, D.C. area; and * Monday, Oct. 5, San Diego, Ca.
In her announcement Matz said, “These Town Hall meetings will provide an invaluable and important venue to have genuine dialogue about a variety of critical issues. “The dislocations experienced by the financial markets have had a significant effect on both corporate and natural person credit unions, and it is incumbent on NCUA and the industry to come together in a forward-looking and reasoned manner to find solutions. “ The ongoing corporate rulemaking is but one element of this process; I am hopeful that, working together, we can turn the broader challenges into a catalyst for changes that will set a course for an even brighter future for the credit union industry.” Use the resource links below to access registration.