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News Now:April 21, 2014

CUNA subcommittee meets with NCUA on RBC plan concerns

Washington
WASHINGTON (4/22/14)--In discussions with top staff at the National Credit Union Administration, the Credit Union National Association's Examination and Supervision Subcommittee continued a thorough review of concerns on legal and economic grounds regarding the agency's proposed risk-based capital proposal.

NCUA Director of Examination and Insurance (E&I) Larry Fazio and Deputy E&I Director Tim Segerson participated in the meeting.

During the meeting, the credit union subcommittee leaders directly questioned the proposal's impact on credit unions' capital cushions above the well-capitalized level, as well the proposed authority to allow the agency, on a case-by-case basis, to impose additional capital requirements above what the rule specifically would require.

The subcommittee also expressed concerns about some of the proposal's highest risk weightings--such as those for mortgages, investments, and member business loans--and the detrimental impact those risk-weightings would have on business and agricultural lending in rural areas.

Well-capitalized credit unions have a higher leverage ratio than other financial institutions and have lower risk generally. In light of this, the subcommittee raised a number of questions regarding the need for a such a high well-capitalized risk-based capital requirement, which would be a ratio of equity to cover losses divided by risk-weighted assets as defined by NCUA and set at 10.5% under the proposal.

The RBC proposal would apply to credit unions with over $50 million in assets. Comments are due May 28.  CUNA has reiterated its request that the agency extend the comment period by 90 days.

CUNA has estimated that the RBC proposal, as written, will reduce credit unions' capital buffers by about $7.6 billion.

The meeting was chaired by Wisconsin Credit Union League President Brett Thompson, and in addition to subcommittee member, CUNA President/CEO Bill Cheney, Chief Economist Bill Hampel, General Counsel Eric Richard, Deputy General Counsel Mary Dunn, and Assistant General Counsel for Special Projects Robin Cook joined in the meeting.

Use the resource link for CUNA's Risk-Based Capital Action Center.

Mich. CUs are new tools for skilled trades toolbox

CU System
LIVONIA, Mich. (4/22/14)--The Michigan Credit Union League (MCUL) has signed on to a partnership looking to close the widening skills gap in Michigan, a trend that has long tripped up the state's job market and economy.

With skilled trade occupations finally on the rise after almost a decade of decline, state leaders are concerned the trades industry might stumble if the number of skilled workers in Michigan falls short of the demand.

To bridge that gap, in collaboration with U.S. Rep. Dan Benishek (R-Iron Mountain) and the Michigan Workforce Development Agency, MCUL is developing a multi-tooled program that will inform students about available career and technical training for the growing number of trade jobs in the state.   

"Our partnership with Congressmen Benishek on this initiative has resulted in the development of timely information on the availability of skilled trades jobs that will be useful across Michigan," said league president/CEO David Adams ( Monitor April 21).

Geared towards teens and young adults, materials include lesson plans and a guidebook that outlines salary expectations, forecasted job growth and training sources for 24 high-demand trade jobs in Michigan. The materials are produced for credit unions, schools, parents and the general public.

Students can also explore various occupations with the program. MCUL is encouraging credit unions to link their websites to the materials.

To access the guide and lesson plans, use the resource link.

Auto sales lead the way for Cornerstone CUs' Q1 growth

CU System
FARMERS BRANCH, Texas (4/22/14)--Continued strength in car and light truck sales during the first quarter this year is an encouraging sign for many credit unions in Arkansas, Oklahoma and Texas, according to a Catalyst Strategic Solutions expert.
 
Chief Strategist Brian Turner said for the second-straight year, Q1's stronger auto sales were matched by strong share growth.
 
"Regionally, Texas credit unions saw loans increase about 9.3%, Oklahoma credit union loans rose by 12% and Arkansas credit union loans were up 5.9%," Turner told Leaguer (April 21). "This trend appears to be continuing during the first part of 2014 although it is expected to slow during the rest of the year."
 
Turner noted that the region's economy and housing base are stabilizing, adding, "This means average home prices are less volatile, wage growth is stronger and unemployment is lower in our core area. Five of the top 10 metropolitan money centers in financial performance reside in our core area."
 
Mortgage originations are expected to decline this year, challenging credit unions to produce enough consumer loans to see overall loan growth over the year, Turner said.
 
"But unlike 2013, the '94 percenters' should see their loan demand increase as consumer spending behavior returns due to our strong employment sector, stable housing market and corporate diversity," he added.
 

Filene: CUs can be young adults' partner on retirement path

CU System
MADISON, Wis. (4/22/14)--It's no secret that younger generations will likely have more trouble adequately preparing themselves financially for retirement. Prospects for a sufficient pool of Social Security dollars, given recent trends in demographics, seem bleak.

Spurred by the idea that credit unions must help their members tackle even the most difficult financial challenges, such as these, the Filene Research Institute recently looked into how younger generations are planning for their respective financial futures.

What researchers found was that fewer and fewer young people are taking steps to save for retirement, but that credit unions can begin reversing this trend by promoting retirement planning education programs aimed specifically at younger generations. 

"This is not necessarily a marketing or sales campaign," researchers wrote in the paper, "but a program that will engage the next generation of retirees at a younger age."

The paper highlights the types of retirement products available both in the U.S. and the U.K.; whether and how young people are using those products; and ways credit unions can get involved in the retirement planning process.

Researchers interviewed several people under age 35 for the paper and found, rather uniformly, that these individuals aren't taking advantage of employer or personal pension plans largely because they don't know how they work.

Credit unions could step in here, researchers said, because many institutions already build financial education into their current operations. 

The paper also argues that collective pensions, a product that primarily relies on cooperation between participants, would fit perfectly within the credit union's financial cooperative philosophy.

"As members from multiple credit unions save in this cooperative retirement fund, their collective bargaining power allows for further investment, lower risk, and average higher returns," the paper said.

The popularity of such a program could create the need for a retirement credit union service organization as well, researchers said.

Credit debt more shameful than excess pounds: NFCC

CU System
WASHINGTON (4/22/14)--When asked what aspect of their lives they would be most embarrassed to admit, the highest number of respondents at 37% indicated it was their credit card debt, according to a National Foundation for Credit Counseling (NFCC) online poll.
 
Coming in a strong second, 30% of respondents indicated they would be embarrassed to admit their credit score. Those results seem to prescribe a financial planning and education opportunity for credit unions.
 
People were given five categories from which to choose. In addition to credit card debt, the options included age, weight, bank balance, credit score or none. 
 
"Since consumers revealed that the two facts they'd be most embarrassed to admit are related to credit, it is obvious that they are not comfortable with how they are currently managing their money," said Gail Cunningham, NFCC spokesperson. "The good news is that there are solutions available for those who want to take charge of their financial future. Since April is Financial Literacy Month, now is the ideal time for people to address their financial concerns."
 
Excessive credit card debt should be seen as a warning sign that a person is in the financial danger zone, said NFCC. Although credit cards may appear to be the solution to a financial shortfall, charging beyond what can be repaid each month can quickly get out of control. Debts that cannot be responsibly managed may lead to late payments resulting in fees being added onto the balance and can sometimes take years to repay. Such activity is likely to negatively impact a person's credit report and potentially result in a lower credit score.
 
Typically one of the highest weighted elements of a credit scoring model is the credit utilization ratio which considers how much a person owes vs. his or her available line of credit. Although lenders each have their own criteria for evaluating credit worthiness, it is smart to not utilize more than 30% of available credit.

In Congress: Patent, housing reforms still front burner

Washington
WASHINGTON (4/22/14)--Congress is back in session on April 28. The Senate Judiciary Committee is expected to markup a new text of its patent reform bill early in the week, and the Senate Banking Committee still has April 29 on its calendar as the date for a markup of its housing finance reform bill.
 
The Senate Judiciary Committee's bill is the Patent Transparency and Improvements Act (S. 1720), which, in part, would aid credit unions and other businesses that have been targeted by patent "trolls," who manipulate the patent system for their own gain.
 
It has been widely reported that a committee vote on the Senate Banking Committee bill on housing finance reform could be delayed, and Credit Union National Association Senior Vice President for Legislative Affairs Ryan Donovan said Monday that delay could happen.
 
"A delay would not be a bad thing--it would just mean that the bill's sponsors are working to secure additional votes for the bill," Donovan said, adding, "The bill's passage is not in doubt.  What is in question is the number of votes it will get."
 
Donovan said CUNA submitted additional materials in support of the bill to the committee and its staff last week, and CUNA expects to see a new bill draft on April 28 or 29 in advance of the markup.

Reps. Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho) earlier this year released the original 425-page draft bill, which addresses how to overhaul the housing finance market, as well as what to do with government-owned Fannie Mae and Freddie Mac.
 
In meetings with White House officials and Federal Housing Finance Agency Director Mel Watt, CUNA has encouraged policymakers to be mindful of the existing regulatory burdens of credit unions and other mortgage servicers as discussions on housing finance reform proceed. Legislators and other officials must proceed judiciously and not layer additional regulatory authority on top of existing regulatory regimes that address mortgage servicing, CUNA has said.
 
CUNA has also underscored on credit unions' behalf that a new system must ensure that the housing finance market remains accessible to credit unions and other smaller institutions and that structure must be in place to prohibit domination by the country's biggest banks.

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Fryzel looks to CUs' future, past as tenure winds down

Washington
ALEXANDRIA, Va. (4/22/14)--As the National Credit Union Administration awaits Senate action on the nomination of J. Mark McWatters to replace Michael Fryzel on the agency board, Fryzel took the occasion of this month's The NCUA Report to reflect on the recent past and the near future of the credit union movement.

Fryzel's term ended in August, but he has agreed to serve until a replacement is confirmed by the Senate.

Fryzel, who writes a monthly column in the Report , this month urged credit unions "to accept the challenges that lie ahead."  He said they include interest rate risk, cybersecurity, competition and the continued avalanche of regulation.

Fryzel said that "how the industry's institutions meet and handle these challenges will determine who survives and can continue to serve their members' needs." He encouraged credit unions to "vigorously pursue and put in place the solutions that will enable you to overcome and successfully move forward to success in the future."

The path, he said, may be difficult at times, "but the rewards will be worth the hard work."

With a philosophy of people helping people, with slogans like "members first," and with a creed of "not for profit, but for service," the tradition of true cooperative financial services will live forever, Fryzel wrote.

The regulator also recounted some the major events that have shaped his tenure at the agency since joining the board as chairman in July 2008. Fryzel served as chairman until Aug. 24, 2009. Major experiences included:
  • Addressing failures in the corporate credit union system;
  • Forming the Office of Consumer Protection and the Office of National Examinations and Supervision;
  • Creating and putting into use a new examination manual to better ensure fair and consistent exams across all regions;
  • Helping the agency recover more than $1.75 billion from banks that created the financial crisis;
  • Drafting new corporate credit union rules;
  • Giving credit unions the authority to engage in derivatives; and
  • Seeing the increase in credit union membership, and the record earnings brought in by some credit unions.
Fryzel's term on the NCUA board officially ended Aug. 2. The Senate Banking Committee is expected to move forward with a vote on McWatters' nomination within the next couple of weeks.
 
For more of The NCUA Report , use the resource link.

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