Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

Washington Archive


Mica urges president Let CUs continue to help small businesses

 Permanent link
WASHINGTON (10/23/09)—Credit union small business members are turning to their credit unions for loans because they cannot find credit elsewhere, including at banks, Credit Union National Association (CUNA) President/CEO Dan Mica wrote to President Barack Obama Thursday. Mica offered CUNA’s wholehearted support of small business initiatives announced by the president on Wednesday, which included increased loan limits for key Small Business Administration (SBA) programs. Mica volunteered CUNA to work with the U.S. Treasury Department, SBA and U.S. Congress to “achieve higher limits for key SBA programs, such as 7(a) and 504 programs today.” In his letter, Mica underscored to Obama that credit unions have continued to support the credit needs of their communities during the country’s economic crisis and noted that credit union member business lending (MBL) activity grew by 14% for the 12-month period ending in June. “However,” Mica urged the president, “this growth cannot continue because of the statutory cap on credit unions' aggregate MBLs. Credit unions have a ceiling on the amount of member business loans they can make -- 12.25% of total assets -- despite very low MBL loss rates. We estimate that if the cap is eased, approximately $10 billion could be provided in new small business loans.” Mica urged administration and congressional support for H.R. 3380, the Promoting Lending to America's Small Businesses Act, to increase the MBL cap to 25% of a credit union's total assets. It also would raise the "de minimis" threshold for a loan to be considered a "member business loan" to $250,000, and exempt loans made to non-profit religious organizations as well as loans made in qualified underserved areas from the cap. The Mica letter was also sent to the attention of U.S. Treasury Secretary Timothy Geithner, SBA Administrator Karen Mills, National Credit Union Administration Chairman Debbie Matz and U.S. Treasury Assistant Secretary for Financial Institutions Michael Barr.

Corp CUs alt capital are stars of NCUA town hall

 Permanent link
WASHINGTON (10/23/09)—The much-anticipated new rules for corporate credit unions could be considered the star of the National Credit Union Administration’s (NCUA’s) virtual town hall meeting Thursday, but the subject of alternative capital also got important attention. During an extensive Q-and-A period, NCUA Chairman Debbie Matz was asked for NCUA's reaction to a recent joint proposal submitted by the Credit Union National Association and the National Association of Federal Credit Unions on alternative capital. Matz responded that the agency is aware of the trade groups’ joint proposal. She added that current alternative capital rules come from a statutory requirement and is not something the NCUA can change without new statutory authority. Matz added that the board currently has not taken a position, but that it is her own view that there are some credit unions that would benefit from alternative capital. She warned that a change in alternative capital rules would not be a "magic bullet" and would not save all credit unions from troubles and, she added, the NCUA would not permit problem Code 4 or 5 credit unions to offer such capital to their members. Matz also opined that alternative capital must preserve the cooperative nature of credit unions and members and it must be transparent that these accounts are not insured. The chairman added that NCUA has not been asked by U.S. Congress for its position on the subject, but would respond when asked. In a separate development, Matz was quoted Wednesday by in a reaction to President Obama’s initiatives to promote credit availability for small businesses. She noted that credit unions that qualify as community development financial institutions (CDFIs), named in the administration plan, are the only credit unions currently allowed to receive outside capital. CDFIs serve low-income communities. She said, that Congress and the Obama administration "should consider whether to change the law so that other credit unions could receive outside funds." When opening the NCUA’s town hall meeting, Matz noted that more than 800 interested parties had tuned in for the session. Matz affirmed that a proposed final rule on the agency’s comprehensive revamping of the regulations governing corporate credit unions will be issued at the Nov. 19 open board meeting. The rule, NCUA General Counsel Bob Fenner reiterated, will have four key component parts. They are: capital, investments, governance and asset/liability management. Fenner assured listeners that the rule will include phase-ins and delayed effective dates “as appropriate.” There likely will be a 90-day comment period for the proposed final rule. The interim final rule generated more than 500 comments. The virtual town hall meeting followed the agency’s open board meeting which addressed insurance topics and approved a community charter conversion. (See related story: NCUA ratifies NCUSIF cap increase, community CU conversion.) For more on the NCUA’s corporate credit union rule, use the resource link below.

Inside Washington (10/22/2009)

 Permanent link
* WASHINGTON (10/23/09)--Speaking to the Exchequer Club in Washington Wednesday, Federal Reserve Board Gov. Daniel Tarullo discussed several ways to contain the problem that several of the nation’s largest banks are considered “too big to fail.” He suggested Congress create a special resolution procedure for systemically important firms, requiring large firms to have specified forms of contingent capital, and improve disclosure requirements for financial institutions. He also recognized that even if the measures are implemented, the “too big to fail” problem may still be tough to contain. Other alternatives he noted included “reversing the 30-year trend that allowed progressively more financial activities within commercial banks and more affiliations with non-bank financial firms. The idea is presumably to insulate insured depository institutions from trading or other capital market activities that are thought riskier than traditional lending functions,” Tarullo said. “Another approach would be to attack the bigness problem head-on by limiting the size or interconnectedness of financial institutions. Some observers have even suggested that existing large firms should be split up into smaller, not-too-big-to-fail entities.” But even without “too big to fail” problems, financial instability can still occur, he added ...

Expedited CARD Act moves forward with CU amendments

 Permanent link
WASHINGTON (10/23/09)--The House Financial Services Committee on Thursday approved H.R. 3639, the Expedited CARD Reform for Consumers Act of 2009. This legislation would move all of the outstanding effective dates in the Credit CARD Act to Dec. 1. An amendment that would exempt depository institutions with under 2 million credit cards in circulation from the expedited effective dates contained in the bill, offered by Rep. Shelley Moore Capito (R-W.V.) and Rep. Brad Sherman (D-Calif.), was added to the legislation via voice vote. Sherman also joined Rep. David Scott (D-Ga.) to offer an amendment to strike from the bill the expedited effective dates for gift cards. This amendment was also added via voice vote. The Credit Union National Association has supported both of these amendments and worked closely with these offices on the amendments. CUNA in a letter to committee Chairman Barney Frank (D-Mass.) and ranking Republican Spencer Bachus (R-Ala.) further praised the Capito/Sherman amendment, saying that it “recognizes the burden” that the expedited effective dates provided by H.R. 3639 would have on small issuers. “Many steps need to be taken before credit unions and others will be able to comply” with the CARD Act in “any orderly fashion,” CUNA President/CEO Dan Mica said, adding that “while the three month period between December and February is a relatively short period of time, it is a critical period of time for credit unions to take these necessary steps.” Federal Reserve Board Chairman Ben Bernanke has also presented the Fed’s views on H.R. 3639, saying that while he could not predict how the accelerated CARD Act effective date would affect interest rates and availability of credit to consumers, the new date “would mean that consumers would receive important benefits and protections earlier.” Responding to a series of questions from Bachus, Bernanke added that the Fed would “issue final regulations without waiting for comments” if the new, accelerated compliance date of Dec. 1 prevented them from receiving industry comments in a timely fashion. The Fed may also have to implement portions of the CARD Act governing fees and disclosures for gift and other prepaid cards, credit card penalty fees, and rate increases without advance public comment if the effective dates of those provisions are moved forward to Dec. 1. Both large and small creditors “must make extensive changes to their systems and business models” to comply with the CARD Act, and Bernanke said that the amount of time needed to comply with the act “may vary by creditor and provision.”

NCUA ratifies higher NCUSIF cap oks community CU conversion

 Permanent link
ALEXANDRIA, Va. (10/23/09)--The National Credit Union Administration (NCUA) as expected has approved a final rule that will increase the National Credit Union Share Insurance Fund (NCUSIF) coverage for members of credit unions to $250,000 through 2013. Approval of this rule puts the amount of member funds that are insured by the NCUA on par with the amount covered by the Federal Deposit Insurance Corporation. The NCUA also approved final versions of interim measures that increased overage for revocable trust accounts and mortgage servicing accounts. NCUA staff indicated during the meeting that the small number of public comments received and the lack of public opposition to the interim version of the rule indicated that the time had come to make the interim rule final.
Click to view larger image NCUA Chairman Debbie Matz displays the 10 1b. document associated with the community charter conversion being considered by the agency at the Thurday open meeting. In December the agency will vote on a final rule to streamline the conversion process.(CUNA Photo)
NCUA Chairman Debbie Matz complimented the rule as a “pro-consumer” application of regulations, and urged NCUA staff to look for other instances where regulations can be improved for the benefit of credit union members. The board also approved the Kansas State Supervisory Authority’s request for an exemption from Section 712.3(d)(3) of NCUA's Rules and Regulations, which dictates that an federal credit union that intends to lend to or invest in a credit union service organization (CUSO) must confirm that the CUSO will grant the NCUA and other regulatory authorities access to its records and internal controls before that federal credit union invests in or lends to the CUSO. However, Matz expressed some reservations that allowing state supervisors to take advantage of this exemption for the first time could create a precedent.
Click to view larger image The NCUA board listens to staff attorney Frank Kressman's presentation on a final revocable trust account rule, which, in part, eliminates the concept of "qualifying beneficiary." (CUNA Photo)
US #1364 Federal Credit Union’s request to convert to a community charter that would cover “persons who live, work, worship, or attend school in, and businesses and other legal entities located in Lake or Porter Counties in Indiana” was also approved by the Board during the meeting. Matz spoke in support of the conversion, saying that allowing the credit union to switch charters would strengthen the credit union’s financial condition while also helping the community. However, NCUA Board Member Michael Fryzel told News Now that the NCUA would monitor the progress of the credit union's conversion over the next year and would encourage them to go back and follow up on their conversion plan if the credit union has not increased its activity within the economically depressed city of Gary, Indiana, which lies in Lake County, Indiana. Matz also said that members of the credit union community can expect a proposed rule streamlining the community credit union charter process at the NCUA’s December board meeting. Turning to the NCUA’s statistics on the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) and NCUSIF, NCUA Chief Financial Officer Mary Ann Woodson reported that the 21 credit union failures that have taken place as of last month have resulted in nearly $95 million in losses to the NCUA’s insurance fund. Woodson also reported a total increase of 55 CAMEL Code 4/5 problem credit unions from the amount reported one year ago, and debuted a new slide comparing the total shares of CAMEL Code 3 troubled credit unions. Also of interest, the NCUA board did not, as intended, address the issue of NCUSIF cost estimates for natural person credit unions for 2010. It is now anticipated that the board will consider this at its November 19th meeting.

House Fin. Svcs. Comm. approves CFPA Act

 Permanent link
WASHINGTON (10/23/09)--The Obama Administration’s proposed Consumer Financial Protection Agency came one step closer to creation on Thursday when the House Financial Services Committee approved H.R. 3126, the Consumer Financial Protection Agency Act, by a vote of 39-29. While the Credit Union National Association (CUNA) has acknowledged the need for greater consumer protections, CUNA President/CEO Dan Mica said that he has “significant concerns about the impact that elements of this legislation will have on credit unions and their members.” Several amendments to the legislation were offered, with one that would limit the proposed CFPA's examination and enforcement authority to credit unions over $1.5 billion in assets and banks with more than $10 billion in assets drawing the interest of CUNA. CUNA indicated that it would not support the CFPA legislation if this amendment remained attached to the bill, and Mica and league president Daniel Egan met late last week with Committee Chairman Barney Frank (D-Mass.) to discuss the issue. Following the meeting, Mica said that Frank "indicated a willingness to work with us to see if we can find a mutually agreeable solution before the bill goes to the floor for a House vote." CUNA has also advocated that the tasks of examination and enforcement regarding credit unions must remain in the hands of the National Credit Union Administration. The CFPA legislation would seek to protect consumers of financial products through the creation of a powerful independent agency with extensive rulemaking, oversight, and enforcement tools.