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NCUA Assessment at 12.4 bp corp. CU rule Sept. 24

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ALEXANDRIA, Va. (9/17/10)--The National Credit Union Administration (NCUA) approved a 12.42 basis point National Credit Union Share Insurance Fund (NCUSIF) assessment at its Thursday open board meeting. Chairman Debbie Matz said, "I assure all stakeholders that the decision to charge this premium is not taken lightly. We understand that 2010 has been a challenging year. Many credit unions are struggling to contain costs. "But I can say unequivocally: This premium is absolutely necessary to replenish the share insurance fund to a level that will protect America's 90 million federally insured credit union members. Members who have kept their savings within the federal coverage limit have never lost a penny--and we intend to keep it that way." Matz said that the NCUA considered the current economic, employment, and credit union CAMEL Code conditions while making its assessment-premium determination. The 12.42-basis point assessment will be based on the total amount of federally insured shares held as of June 30. However, the assessment levied on credit unions with assets of $50 million or less will be based on the amount of federally insured shares held as of Dec. 31, 2009. Agency staff said the premium will increase the NCUSIF's equity ratio to 1.3%, and will replenish the NCUSIF with an estimated $933 million in funds. However, the NCUA warned that the NCUSIF equity ratio will immediately begin to decline: "The forward looking analysis shows the premium is sufficient to maintain the level above 1.2% through June 30, 2011, while falling to 1.17% by year-end 2011." Credit Union National Association President/CEO Bill Cheney said that while the premium “could have been somewhat lower,” the 12.42 basis point premium appears reasonable “under current circumstances.” The NCUA has not determined whether or not a similar assessment would be charged in 2011, and Matz said that the most important factor affecting the likelihood of any future assessments is the performance of individual credit unions. (For more of Matz’s statement, use the resource link.) The NCUA on Thursday sent a Letter to Credit Unions (No. 10-CU-17) detailing how those credit unions can plan and account for the expense of the NCUSIF premium. Credit unions can expect an invoice in October, and will be required to pay their assessments in November, the NCUA added. The NCUSIF also impacted another aspect of the NCUA’s practices, as the board unanimously approved a motion to use the accounting standards promulgated by the Federal Accounting Standards Advisory Board (FASAB) to monitor the status of the NCUSIF. According to NCUA staff, the FASAB standards would create a “more appropriate financial presentation” for the NCUSIF, and would give a clearer view of the NCUSIF’s condition to prime stakeholders. The FASAB standards are the “preferred” accounting standards for most federal entities that report to Congress and the Office of Management and Budget. The current status of the NCUSIF and the Temporary Corporate Credit Union Stabilization Fund were also covered during the meeting, with NCUA Chief Financial Officer Mary Ann Woodson reporting little change in the number of CAMEL Code 4/5 credit unions, or the percentage of total shares held by those credit unions. Finally, the NCUA announced that it will release its widely anticipated corporate credit union regulatory and legacy asset plans at a Sept. 24 special open meeting.

Short term loans secondary capital approved by NCUA

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ALEXANDRIA, Va. (9/17/10)—The National Credit Union Administration (NCUA) on Thursday made final a pair of interim final rules that altered Part 701 of NCUA regulations. The board approved a rule that would allow federal credit unions to offer short-term, small amount (STS) loans to their members. The loans are meant to serve as an alternative to predatory payday loans that are offered by other financial service providers. The rule, which requires the individual receiving the loan to be a member of the lending credit union for at least one month, could also potentially bring the unbanked into the credit union system. The final rule permits federal credit unions to charge an interest rate that is a maximum of 10 percentage points above the established usury ceiling at that time. The current federal credit union usury ceiling is 18%, and the final rule would therefore allow federal credit unions to charge 28% interest on STS loans. A $20 application fee may also be charged. The rule would impose limitations on the permissible term, amount, and fees for these types of loans, and would not permit lenders to roll over any of these short-term loans. However, the NCUA has amended the final rule to allow lenders to extend the term of some loans by as much as six months if the member is having trouble paying back the loan within its original timeframe. Federal credit unions may set a cap on the total monetary amount of STS loans granted to members, and will not be permitted to require loan payment via member payroll deduction. The STS rule is not the only way that federal credit unions can lawfully offer payday loan alternatives. Federal credit unions may, now or in the future, also offer short-term loan products with different qualities, so long as those loans' terms comply with Regulation Z and NCUA rules (other than the new STS rule). The interest rate on such loans, however, would be limited to no more than the 18% that is allowed by the generally applicable, federal credit union usury ceiling. The NCUA also approved an interim final rule that permitted low-income designated credit unions to redeem all or part of government-funded secondary capital, along with matching secondary capital, “at any time after it has been on deposit for two years.”

Inside Washington (09/16/2010)

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* WASHINGTON (9/17/10)--Elizabeth Warren, who chaired the Congressional Oversight Panel, will oversee the creation of the Consumer Financial Protection Bureau as an assistant to President Barack Obama, said an official briefed on the decision (The New York Times Sept. 16). Warren would be allowed to run the bureau without a traditional Senate confirmation. The bureau was created under the Dodd-Frank Act. Warren will be named also will be a special adviser to Treasury Secretary Timothy Geithner. She will report to both Geithner and Obama. The regulatory reform law gave the Treasury power over the bureau until a permanent director is confirmed by the Senate for a five-year term. Warren, 61, is a Harvard professor and authority on bankruptcy law ... * WASHINGTON (9/17/10)--During a recent hearing, Michael Barr, Treasury Department assistant secretary for financial institutions, said the Obama administration would unveil a plan next year to revamp the government-sponsored enterprises, Fannie Mae and Freddie Mac. However, many Republicans said the administration should already have a plan. The plan will be out in January, Barr said, although he had no other details (American Banker Sept. 16). Also during the hearing, Edward DeMarco, Federal Housing Finance Agency acting director, criticized large financial institutions for not repurchasing bad mortgages sold to Fannie Mae and Freddie Mac. As of the second quarter, Fannie and Freddie had $11 billion in outstanding repurchase requests. FHFA may take action if discussions between lenders and enterprises are not fruitful, DeMarco said ... * WASHINGTON (9/17/10)--An exemption for the Securities and Exchange Commission (SEC) regarding public disclosure requirements is needed because financial firms won’t provide some information to the agency if they think it will be released, SEC Chairman Mary Schapiro said Thursday (The New York Times Sept. 16). Some lawmakers have suggested closing a loophole in the financial overhaul law that would permit SEC to withhold from the public some records related to its monitoring of financial firms, including hedge funds and investment advisers. The exception is needed for SEC to develop a solid examination program to better protect investors, she said ... * WASHINGTON (9/17/10)--Senators told Treasury Secretary Timothy Geithner that China’s economic and trade policies are roadblocks to the U.S.’s economic recovery. Sen. Richard Shelby (R-Ala.) said China manipulates its currency to subsidize exports and asked why the administration is refusing to designate China as a currency manipulator (The New York Times Sept. 16). Geithner said he agreed that the Chinese currency was significantly undervalued and that the U.S. would work with the Group of 20 and the International Monetary Fund to mitigate some of the issues related to the currency issue. The administration also is reviewing a complaint by a United Steelworkers union regarding Chinese policies in the renewable energy sector ...

Small biz jobs bill approved by Senate

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WASHINGTON (9/17/10)--The U.S. Senate Thursday passed H.R. 5297, the Small Business Jobs and Credit Act, by a vote of 61 to 38. Credit unions launched a valiant effort to back an amendment to the bill that would have increased the member business lending (MBL) cap, but in the end the bill was passed with a $30 billion fund to encourage more bank lending, but without the MBL provision. The bill does have items of interest to credit unions. For instance, it includes higher Small Business Administration (SBA) loan limits, increasing SBA 7(a) loan limits to $5 million from $2 million, 504 loan limits to $5.5 million from $1.5 million, and 7(a) "Express Loans" to $1 million from $300,000. The bill also ups the definition of microloans from $35,000 to $50,000. Other provisions in the bill would:
* Allow, starting in 2011, retirement savings plans sponsored by state and local governments (governmental 457(b) plans) to include Roth accounts, which are currently available only in 401(k) and 403(b) plans: * Allow 401(k), 403(b), and governmental 457(b) plans to permit participants to roll their pre-tax account balances into a Roth account; * Appropriate $505 million to extend through the end of this year some of the Stimulus Act provisions such as eliminating borrower fees on SBA 7(a) and 504 loans, as well as extending the increased government 90% (up from 75%) guarantee on 7(a) loans: and * Provide $1.5 billion in grants to existing state small business programs that help private lenders extend more credit to small businesses.
The bill also would temporarily shorten the holding period of assets subject to the built-in gains tax to five years if the fifth taxable year in the holding period precedes the taxable year beginning in 2011. One-third of U.S. banks are organized as Subchapter S banks. The bill now must go back to the House for a vote because the Senate modified the bill originally passed by the House.

Frank declares no CRA for CUs in new bill

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WASHINGTON (9/17/10)--House Financial Services Committee Chairman Barney
Click to view larger image House Financial Services Chairman Barney Frank hit a number of credit union hot topics in his address at Credit Union House on Thursday. The Massachusetts Democrat talked about CRA, interchange and pending member business lending legislation. (CUNA Photo)
Frank (D-Mass.) assured credit unions Thursday that Community Reinvestment Act (CRA) requirements are not in their future. Frank, speaking at a state league Hike the Hill gathering at Credit Union House, said that while his panel was set to discuss a new CRA bill at a Sept. 21 hearing, that bill does not include credit unions. “This is a fight you will not have to worry about in the future,” Frank told the Massachusetts/New Hampshire/Rhode Island credit union leagues. The hearing has since been cancelled. The House committee chairman went on to pledge continued work to address credit union concerns regarding new interchange regulations. Frank reminded the group that he opposed the interchange language and that he worked to make changes that should benefit credit unions, such as the addition of language to prohibit discrimination against credit unions and other smaller card issuers that are not covered by the interchange provisions. He said that he would continue to work to ensure that all costs were taken into consideration when setting interchange fees, not just the physical costs of swiping the card. Frank also addressed the subject of pending legislation to increase the credit union member business lending (MBL) cap. He repeated his commitment that if an MBL bill gets through the Senate, he will work to get it considered in the House. The National Credit Union Administration (NCUA) Thursday delivered a letter to Senate Majority Leader Harry Reid (D-Nev.) thanking him for efforts to get an MBL cap increase to the Senate floor this year. NCUA Chairman Debbie Matz, in the letter, reiterated her support for the higher MBL authority and reminded Reid that credit union member business lending “has been an important source of credit for American entrepreneurs for over 70 years.”

CFPB may result in some examination changes NCUA says

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ALEXANDRIA, Va. (9/17/10)—While the National Credit Union Administration (NCUA) will retain the majority of its examination authority under the recently enacted Dodd-Frank financial regulatory reform package, the NCUA on Thursday said that it will likely redesign some aspects of its examination process to better interact with the still pending Consumer Financial Protection Bureau (CFPB). Specifically, the NCUA will retain examination authority for credit unions with under $10 billion in assets. NCUA was briefed on how the Dodd-Frank legislation and, more specifically, the CFPB will impact its practices going forward. The CFPB will be tasked with, among other things, monitoring the financial system for systemic risk. NCUA Chairman Debbie Matz during the agency's Thursday open board meeting said that the regulation and monitoring of systemic risk is “critical.” The CFPB will likely not be up and running for another 6 months to a year. The Office of Financial Research, which will monitor the markets for evidence of systemic risk trends, will work with NCUA and other regulators as it establishes its own guidelines. NCUA officials on Thursday said that NCUA may need to alter some of its own data collection practices to work more closely with the to-be-established office. However, the NCUA should not be subject to the OFR requirements for up to three years. NCUA’s data collection processes could also be impacted by its participation in the national foreclosure database, another program that will be established under the Dodd-Frank legislation.