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Inside Washington (11/21/2008)

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* WASHINGTON (11/24/08)--The Federal Deposit Insurance Corp. (FDIC) Thursday provided mortgage servicers and investors with a toolkit that outlines FDIC program terms at IndyMac, offers insight into characteristics that drive modification modeling at the bank, and provides a framework for implementing similar programs ... * WASHINGTON (11/24/08)--Lawmakers criticized regulators at a House Agriculture Committee hearing Thursday for allowing a turf war to slow efforts on creating better oversight of credit-default swaps (CDS). The creation of two CDS clearing houses is dragging because of reviews by the Securities and Exchange Commission (SEC), the Federal Reserve Board and the Commodities Future Trading Commission, witnesses said (American Banker Nov. 21). Also, the New York State Insurance Department announced Thursday that it would stop plans to regulate certain types of CDS contracts by Jan. 1. Lawmakers at the hearing said they were frustrated that the clearing houses have not been set up and asked what was taking so long. Erik Sirri, director of the SEC’s trading and markets division, said the agency is planning to finish its review of exemption requests by mid-December ... * WASHINGTON (11/24/08)--The Basel Committee on Banking Supervision announced Thursday a comprehensive strategy to address weaknesses in the financial market. The strategy has eight building blocks: strengthening the risk capture of the Basel II framework; enhancing the quality of Tier 1 capital; building additional shock absorbers into the capital framework that can be drawn upon during periods of stress and dampen procyclicality; evaluating the need to supplement risk-based measures with simple gross measures of exposure in both prudential and risk management frameworks to help contain leverage in the banking system; strengthening supervisory frameworks to assess funding liquidity at cross-border banks; leveraging Basel II to strengthen risk management and governance practices at banks; strengthening counterparty credit risk capital, risk management and disclosure at banks; and promoting globally coordinated supervisory follow-up exercises to ensure implementation of supervisory and industry sound principles ...

CUs post asset savings loan and member figures

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ALEXANDRIA, Va. (11/24/08)—Call Report data as of Sept. 30 shows credit unions remain financially sound but are not unscathed by repercussions of the country’s current economic turmoil. The credit union system posted asset, loan and share growth, as well an increase in membership, according to the National Credit Union Administration (NCUA). However, return on average assets declined and net income decreased. The 15.7% net income decrease was primarily attributed to a 71.9% increase in provisions for loan and lease losses as credit unions reserve for possible losses. The NCUA also noted that the credit union data reflects current stress in the financial industry by an increase in delinquency ratios in all loan types. “Credit unions’ continued high level of net worth will help them weather today’s turbulent economy;” said NCUA Chairman Michael Fryzel in a release. “However, credit unions are not immune to financial stress, as noted in the delinquency increase in categories such as credit cards and mortgage loans.” Fryzel said the NCUA is “keeping a watchful eye on these adverse trends as part of a broader commitment to maintaining a safe and sound credit union industry.” Details of major balance sheet categories and membership growth in federally insured credit unions from Dec. 31, 2007, to Sept. 30, 2008, include:
* Assets increased 6.4% to $801.7 billion from $753.4 billion; * Loans increased 6.3% to $560.0 billion from $526.9 billion; * Investments increased 15.5% to $164.5 billion from $142.5 billion; * Shares increased 5.8% to $668.9 billion from $632.4 billion; * Net worth increased 5.21% to $89.5 billion from $86.2 billion; and * Membership increased 2.0% to 88.5 million members.
The NCUA also noted the loan-to-share ratio increased to 83.73% percent. First mortgage real estate loans and lines of credit expanded 13.6%, used automobile loans grew 5.6%, and unsecured credit card debt increased 4.5%. New automobile loans continued to fall marking a 5.4% decline so far in 2008. Regular shares increased 6.3% while money market shares increased 14.4%, share certificates increased 1.4% and IRA/KEOGH accounts increased 8.4%. Loan growth slightly outpaced savings, therefore pushing up the loan-to-share ratio to 83.7% from the 83.3% at year-end 2007. The loan delinquency ratio increased 20 basis points, up from .93% to 1.13%, and the net charge-off ratio increased from 0.51% to 0.75% during the first nine months of the year. The return-on-average-assets ratio dropped from 0.64% to 0.51%. Use the resource link below for complete details of third quarter 2008 data on the NCUA Consolidated Balance Sheet.

CUNA wants more shared sign flexibility

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WASHINGTON (11/24/08)--The Credit Union National Association (CUNA) supports the goal of a National Credit Union Administration (NCUA) proposal to reduce burdens of the current share insurance sign requirements for shared branch networks, but urges even greater flexibility for credit unions. Currently, for tellers accepting share deposits for both federally insured and nonfederally insured credit unions, there must be a second sign adjacent to the official NCUA insurance sign. The second sign must list each federally insured credit union served by the teller, along with a statement that only those credit unions are federally insured. The proposed rule will replace the required list of credit unions with a general statement that not all of the credit unions served by the teller are federally insured and members should contact their credit union for further information. In a Nov. 21 comment letter to the agency, CUNA such additional flexibility as:
* Allowing credit unions to post a single sign in a conspicuous location in the lobby that would include the general statement that not all of the credit unions served by the teller are federally insured and members should contact their credit union for further information; or, alternatively, * Instead of the second sign, credit unions that provide service to members of other credit unions could have the option of providing a similar disclosure that the teller would hand out to these nonmembers. Either of these alternatives should serve the goal of sufficiently informing members of their insurance coverage, especially considering that very few consumers are members of nonfederally insured credit unions.
Also, CUNA wrote, a federally insured credit union that provides service to members of other credit unions should have the option of indicating either on the sign or any separate disclosure that it is federally insured. “This should alleviate concerns from members who may not be aware of the insurance status or may believe the status has changed when they read these new signs or disclosures. This is especially important in the current environment in which many consumers are concerned about the safety of the money they have in financial institutions,” the CUNA letter said.