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Matz says new rules should target risk not CUs

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WASHINGTON (9/20/11)--Chairman Debbie Matz of the National Credit Union Administration (NCUA) said Monday that as the agency moves to modernize its regulatory regime, it is any risks associated with evolving products, services, tools and relationships that should be targeted in rulemaking, not credit unions themselves. Matz said her preferred, targeted approach would affect only those behaviors most likely to cause losses, which would ultimately be borne by credit unions through their funding of the National Credit Union Share Insurance Fund. The Credit Union National Associatin (CUNA) noted that this approach could be positive for the agency and credit unions. CUNA has been urging the agency to adopt a more productive approach to rulemaking that focuses on problem areas rather than issuing rules with blanket applicability, regardless of the credit union’s level of risk. In announcing her “Regulatory Modernization Initiative, ” Matz said the plan will balance two key principles:
* Safety and soundness--strengthening regulations necessary to protect the 91 million credit union members and the NCUSIF; and * Regulatory relief--stripping away regulations that limit flexibility and growth, without jeopardizing safety and soundness.
“For rules which NCUA can control, we will ensure that they are in sync with the modern marketplace, clearly written, and targeted to areas of risk,” Matz said during an address to the National Association of Federal Credit Unions’ Congressional Caucus. “Regulatory modernization means effective regulation, not excessive regulation,” Matz concluded. The NCUA has said it is planning to modernize four main rules to strengthen safety and soundness by addressing marketplace practices and emerging risks. They are:
* A new loan participation protection rule covering both originators and buyers to require originators to retain some of the original loan risk on their balance sheets, and require buyers to do due diligence not just at origination, but on-going, just as they would for loans they originated in-house; * A new investment concentration exposure rule to limit concentrations in the riskiest investments, similar to the new investment standards for corporate credit unions; * A revised Credit Union Service Organization (CUSO) risk transparency rule, proposed in July, to provide a clearer picture of the off-balance sheet risks at CUSOs that sell high-risk services to credit unions (see resource link to read the Credit Union National Association’s comment letter); and * A targeted interest rate risk management rule to require credit unions over certain asset sizes and risk thresholds to have an appropriate policy to manage their risk.
CUNA is concerned, however, that some of these proposals, for example the CUSO and IRR proposal, are not sufficiently targeted to problem areas and will have a negative effect on credit union innovation. The association hopes to work with the agency to encourage senior agency officials to consider changes to those and other proposals that will address concerns without imposing regulatory overkill on the credit union system. The NCUA board has also prosed introduced proposals intended to reduce credit unions’ compliance burdens, such as:
* Allowing credit unions to use simple derivatives as an interest rate hedge; * Allowing credit unions to count subordinated debt toward risk-based net worth and to assign zero-risk weights to most U.S. Treasury securities; * Extending six of the seven remaining RegFlex provisions to all federal credit unions; and * Supporting legislative efforts to lift restrictions on member business lending and supplemental capital for credit unions.
Reducing credit unions’ regulatory burden is a key issue for CUNA and is among top topics to be broached as CUNA, the state leauges and credit unions launch their Hike the Hill events this month. Delegations from Alabama, Florida, Wisconsin, Ohio, Kentucky, Arizona, Colorado, Wyoming, Idaho, Illinois and Kansas are in town this week to visit their federal lawmakers on this issue, as well member business lending, alternative capital, and credit unions' tax status. Also speaking Monday, NCUA board member Gigi Hyland underscored how credit unions are a part of the current national conversation. She said credit unions are “multi-faceted and multi-relevant” to the current federal debate on how best to stimulate job creation and the economy. Credit unions, in my opinion, need to be part of the debate on how to create jobs and stir our nation’s economic recovery,” she said, adding that she hopes the U.S. Congress sees the jobs-creating opportunity—at no cost to the taxpayer—of raising the member business lending cap.

Data security bill improved by CUNA-backed amendment

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WASHINGTON (9/20/11)--The Senate Judiciary Committee adopted an amendment late last week to exempt credit unions and other financial institutions that are in compliance with Gramm-Leach-Bliley notification requirements from the data breach notification provisions of a Senate data security bill. That bill, the Personal Data Privacy and Security Act (S. 1151), proposes to establish national standards for data security and data breach notification and already exempted Graham-Leach-Bliley compliant institutions from data security requirements contained in the bill. In advance of the amendment vote, CUNA wrote to the judiciary panel’s leadership and warned, in part, that S. 1151, and a similar pending bill S. 1408, could create an unnecessary duplicative regulatory burden for credit unions. “As you know, credit unions are already subject to very robust data security and data breach notification requirements under the Gramm-Leach-Bliley Act, subject to the supervision and enforcement of the National Credit Union Administration (NCUA) or the state supervisory agencies,” CUNA President CEO/Bill Cheney wrote. “We are concerned that neither S. 1151 nor S. 1408 extends a similar exemption to the bills’ data breach notification requirements. These requirements, if applied to credit unions, would be largely duplicative of current regulatory requirements and increase the cost of compliance to the detriment of credit unions and their members,” the CUNA leader added. Use the resource link to read CUNA’s complete letter.

Congress this week Deficit talks return data security jobs more

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WASHINGTON (9/20/11)—In Washington, D.C., the U.S. House and Senate are back in session this week and looking forward to a pretty packed schedule of hearings among panels of key interest to credit unions before adjourning next week for another district work session. The Credit Union National Association (CUNA) will be monitoring such hearings as today’s Senate Budget Committee session entitled, “Promoting Job Creation in the United States.” CUNA, the state leagues, and credit unions support a statutory increase to the credit union member business lending cap as a way to infuse $13 billion in new funds into the economy, creating 140,000 new jobs in the first year after enactment--at no cost to the U.S. taxpayer. Bills to increase the MBL cap to 27.5%, up from 12.25%, have bi-partisan support in both the House and Senate. In today’s hearing, former Federal Reserve Vice Chairman Alice Rivlin is among those scheduled to testify. In addition to the Budget Committee hearing, CUNA will be following hearings today in the Senate Banking Committee and the Joint Economic Committee. A hearing called by the banking panel’s subcommittee on housing, transportation and urban development is slated to study, "New Ideas to Address the Glut of Foreclosed Properties." Allan Dechert, president of the New Jersey Association of Realtors, and Bob Nielsen, chairman of the board of the National Association of Homebuilders, are expected to testify. The Joint Economic Committee has scheduled a hearing on the effects that the federal debt on the U.S. economy and a panel of distinguished academics comprise the expected witness panel. On Wednesday’s radar:
* The House Financial Services subcommittee on capital markets and government-sponsored enterprises, similar to the Senate’s budget committee on Tuesday, intends to conduct a hearing on "Legislative Proposals to Facilitate Small Business Capital Formation and Job Creation." * A House Ways and Means Committee hearing will focus on the variety of economic models used by the Joint Committee on Taxation to analyze and score tax reform legislation. * And, the Senate Energy and Commerce Committee is expected to markup pending legislation, including S. 1207, the Data Security and Breach Notification Act.
The country’s tax code is on the dissecting table at the continuing hearings of the Joint Committee on Deficit Reduction, which isexpected to conduct a hearing Thursday entitled, “Overview: Revenue Options and Reforming the Tax Code." Thomas Barthold, chief of staff of the Joint Committee on Taxation, is expected to testify. Also on the Thursday agenda, the Senate Banking Committee will hold confirmation hearings on the nominations of Alan Krueger to be a member of the Council of Economic Advisers; David Montoya to be inspector general of the Housing and Urban Development Department; and Cyrus Amir-Mokri to be U.S. Treasury assistant secretary for financial institutions. Amir-Mokri would replace Michael Barr, who left Treasury last year to return to the University of Michigan. The nominees are expected to testify. Also of note, the House Financial Services subcommittee on financial institutions and consumer credit has scheduled a Thursday hearing on the availability of credit products for consumers who may not have access to services provided by traditional financial institutions. And, finally, the Senate Judiciary Committee is expected to resume consideration of pending legislation, including S. 1151, the Personal Data Privacy and Security Act, S. 1408, the Data Breach Notification Act, and S. 1535, the Personal Data Protection and Breach Accountability Act. (See related story: Data security bill improved by CUNA-backed amendment.)

Inside Washington (09/19/2011)

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* WASHINGTON (9/20/11)--The Obama administration’s foreclosure-to-rental program has proved difficult to implement (American Banker Sept. 19). The government is seeking to rent out foreclosed properties held by Fannie Mae, Freddie Mac and the Federal Housing Administration until the housing market stabilizes. But several obstacles to the program’s success have emerged. Goals have yet to be established for the program. The Federal Housing Finance Agency, which oversees Fannie and Freddie, hopes to stabilize neighborhoods and home values, but consumer groups believe the program should also serve affordable housing and energy efficiency goals. The program’s structure also has yet to be determined. One approach is for the government to hire contractors to renovate the foreclosed properties and then rent out the units before selling them. Under another strategy, the government could sell the properties with the contingency that the buyers will renovate them. In a third approach, the government would jointly purchase the properties with buyers, and share in any price appreciation. The government must also be sure buyers have an understanding of local housing markets. Although a large number of institutional investors are waiting to purchase foreclosed homes, the housing market is a very localized business, said Ivy Zelman, the chief executive of Zelman & Associates ... * WASHINGTON (9/20/11)--Fannie Mae and Freddie Mac are raising the guarantee fees they charge mortgage lenders and the government-sponsored enterprises may end the volume discounts they give big banks, Ed DeMarco, acting director of the Federal Housing Finance Agency, said Monday (American Banker Sept. 19). The volume discounts may be phased out because they were based on competition between Fannie and Freddie to gain market share, said DeMarco, speaking before a conference in Raleigh, N.C. Because Fannie and Freddie are operating under conservatorship, they no longer compete with each other’s business from big banks. Both government-sponsored enterprises began raising guarantee fees earlier this year and will continue doing so through 2012, DeMarco said ...