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NCUA still open to assessment ideas says Matz

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WASHINGTON (11/24/10)--National Credit Union Administration (NCUA) Chairman Debbie Matz last week said that her agency is open to suggestions on possible ways to address the corporate credit union system’s liquidity needs so that the estimated 2011 corporate stabilization assessment of 20 to 25 basis points (bp) might be reduced. Speaking at the Association of American Credit Union Leagues (AACUL) annual meeting in Dallas, Matz added that the NCUA was “certainly open” to suggestions, and would “at least listen” to see if any suggestions were workable. In ten town hall meetings throughout October, NCUA officials cautioned that corporate stabilization assessments would be higher in 2011 and 2012 due to the need to repay medium-term notes that were issued in 2009 to preserve liquidity in the corporate system. The NCUA last week projected total dual assessments of 20-35 bp for 2011. Increasing losses at natural person credit unions could require a National Credit Union Share Insurance Fund (NCUSIF) assessment ranging from zero to 10 bp; and repaying borrowings triggered by losses at corporate credit unions could require a Temporary Corporate Credit Union Stabilization Fund assessment of 20-25 bp, according to NCUA staff. These assessments could collect up to $2.7 billion in funds. The Credit Union National Association (CUNA) discussed the assessment issue with the NCUA after Thursday’s board meeting. Matz also asked CUNA, credit union leagues, and individual credit unions to comment on proposed limits to corporate credit union membership that were released during last Thursday’s meeting. (See related stories in Nov. 19 edition of News Now.) Matz also discussed the NCUA’s 2011 budget increase during her remarks, saying that the NCUA’s salary increase and corresponding budget increase are due primarily to additional personnel hires needed to complete the agency’s annual examination program and a previously negotiated 6.1% pay raise that is in the current NCUA employee collective bargaining agreement. NCUA managers and others who are not in the bargaining unit are budgeted to receive an average raise of 3%. The NCUA’s budget will increase by $25 million in 2011, with most of that increase going to cover the addition of 78 staff positions and a pay raise that for some employees could go as high as 8% after factoring in “locality pay” adjustments that are mandated across the federal government. CUNA President/CEO Bill Cheney last week questioned the NCUA’s budgetary increase, saying that CUNA was concerned that the NCUA was "asking for more resources from credit unions at a time when so many credit unions are feeling the pain of an obstinate recession."

Inside Washington (11/23/2010)

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* WASHINGTON (11/24/10)--The Federal Housing Finance Agency on Monday issued a proposal that could potentially lead to the consolidation of entities within the Federal Home Loan Bank System (FHLBS), according to industry observers (American Banker Nov. 23). The proposal provides guidelines and procedures for the voluntary mergers of any of the 12 banks within the FHLBS. While Home Loan banks can currently merge, the existing Housing and Economic Recovery Act does not offer specific guidelines or terms of approval for mergers. The proposal comes one week after the FHFA disclosed that seven of the 12 FHL banks had very low supervisory ratings, according to Karen Shaw Petrou, managing partner at Federal Financial Analytics Inc. Petrou said the proposal reflects the condition of these banks and gives them reason to consider their strategic options. Under the proposal, the FHFA said it would consider a merger where two banks combine to form an entirely new bank. Purchase-and-assumption agreements, in which one or more banks acquire the assets and assume most of the liabilities of another bank, would also be considered … * WASHINGTON (11/24/10)--With unemployment rates still high and economic growth sluggish, two more of the Obama administration’s top economic advisers are leaving the White House (The Wall Street Journal Nov. 23). National Economic Committee Deputy Director Diana Farrell and U.S. Treasury Department Assistant Secretary for Financial Institutions Michael Barr will depart by the end of the year, the White House said. Both Farrell and Barr helped shape the financial overhaul legislation passed by Congress earlier this year. Barr met with credit union trade association officials, including representatives from the Credit Union National Association, during the process. Farrell played a key role in the restructuring of General Motors and Chrysler, and also was involved in the administration’s efforts to address the mortgage crisis … * WASHINGTON (11/24/10)--Bankers are worried that language in the Dodd-Frank regulatory reform law will give the Consumer Financial Protection Bureau (CFPB) too much leeway in banning certain financial products or services. While the agency can currently limit or bar a practice it defines as unfair or deceptive, bankers fear that adding the word “abusive” to that criteria will give the CFPB too much flexibility, (American Banker Nov. 23). Until 2008, the Federal Reserve Board had the power to ban unfair or deceptive products, and the Fed used that power sparingly. For example, only when it was pressured by Congress in 2008 did the Fed ban certain credit card practices. The Dodd-Frank law transferred that power to the CFPB and added “abusive” as a category of product that the agency can ban or restrict. Laurence Platt, a partner with the law firm K&L Gates, said plenty of case law defines what is unfair and deceptive, but similar standards don’t exist for the term “abusive.” Some regulators did not harbor the same worries. New York Banking Superintendent Richard Neiman suggested the term “abusive” was added to ensure that advantage was not taken of consumers. Dodd-Frank did offer a definition of “abusive,” describing it as a product or service that materially interferes with a consumer’s ability to understand a term or condition of a product or takes unreasonable advantage of the ability of a consumer to understand it … * WASHINGTON (11/24/10)--House Financial Services Committee Chairman Barney Frank expressed disappointment with Republicans for joining foreign central banks in their recent criticism of the Federal Reserve Board (American Banker Nov. 23). Frank said it was the role of lawmakers to debate economic policy rather than join attacks by foreign central banks whose cause is to convince the Federal Reserve to subordinate U.S. economic needs in favor of their own currency requirements. Republican congressional leaders last week sent a letter to Fed Chairman Bernard Bernanke expressing their reservations about the Fed’s decision to purchase $600 billion in Treasury bonds, as a quantitative easing to boost the economy … * WASHINGTON (11/24/10)--The first meeting of the Financial Stability Oversight Council, the new regulatory panel given authority by the U.S. Congress to remove risks to the financial system, sparked an onslaught of 1,500 public comment letters when the council asked two controversial questions: How should regulators define the term "systemically significant" as it would apply to non-bank firms, a designation that would bring tougher oversight? And how should regulators go about banning propriety trading under what has come to be known as the "Volcker Rule"? (Washington Post Nov. 22) It seems everyone had something to say as opinions--ranging from long essays pondering the intricate aspects of the rule to short notes simply urging a new regulatory toughness--were sent by industry executives, explaining why their institutions should not be considered systemically important, as well as consumer advocates and ordinary citizens. The council was scheduled to conduct its second session, with a closed meeting in the morning and an open meeting at noon, yesterday …

FAF announces new FASB GASB review process

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WASHINGTON (11/24/10)--The Financial Accounting Foundation (FAF) recently announced a new process for conducting post-implementation reviews of the accounting and financial reporting standards issued by the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB). FASB is responsible for developing and maintaining U.S. generally accepted accounting principles, which credit unions over $10 million in assets must comply with. The process will be independent of FASB and GASB’s current standard-setting processes and will ensure the continued autonomy of those standard-setting processes, the FAF added. FAF Chairman John Brennan said that the new post-implementation review process “strikes the appropriate balance” between ensuring the effectiveness of FASB and GASB and protecting their independence as standard setters. The process will also “provide a vitally important mechanism for obtaining ‘real world’ feedback and analysis on the application, usefulness, and effectiveness of standards set by our Boards,” Brennan added. The FAF reviewers will work to assess whether the standards set by FASB and GASB meet their intended financial reporting objectives, and will report their results to FAF Trustees and FAF President Teresa Polley. The FAF’s review staff will be comprised of current FASB and GASB staff. Initially, the reviewers will examine both a single FASB and GASB standard in order to test the review process. Testing of the FASB standard should be completed by mid-2011, according to the FAF. One of FASB’s standard setting goals is update to financial instrument accounting standards by requiring most financial assets and liabilities to be reported under Generally Accepted Accounting Principles (GAAP) at fair value. Credit unions over $10 million in assets are required to comply with GAAP, and would be required to comply with these changes. CUNA has opposed these changes, saying that the changes would provide no benefit to credit unions while substantially increasing their compliance costs. For the full FAF release, use the resource link.

FinCEN plan allows limited SAR sharing

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WASHINGTON (11/24/10)--The Financial Crimes Enforcement Network (FinCEN) on Tuesday released a final rule that FinCEN Director James Freis said would “promote the protection of Suspicious Activity Report (SAR) information while seeking to ensure that the appropriate parties, but only those parties, have access to SARs.” According to a FinCEN release, the new FinCEN SAR confidentiality regulations “clarify the scope of the statutory prohibition against the disclosure by a financial institution or by a government agency of a SAR or any information that would reveal the existence of a SAR.” The new rules “expand the ability of certain financial institutions to share SAR information with most affiliates,” according to FinCEN. Freis said that this expansion “will help the financial industry protect itself from abuses of financial crime, be consistent with industry efforts to strengthen enterprise-wide risk management, and also promote the reporting of even more useful information to FinCEN and law enforcement investigators.” FinCEN has also promoted the importance of SAR confidentiality to financial institutions, their federal and state regulators, members of the law enforcement community, and self-regulatory organizations via an advisory, and has also provided tailored SAR confidentiality rule guidance for both depository institutions and securities/futures institutions. Under the new guidance, these entities will be permitted to share SAR information with domestic affiliates that are also subject to SAR rules, but will not be allowed to share SAR information with foreign affiliates. The Credit Union National Association in the past has urged caution when sharing SAR information. Both the final rule and the guidance will become effective 30 days after they are published in the Federal Register. For the FinCEN release, use the resource link.

Fed should withdraw Reg Z mortgage proposal CUNA

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WASHINGTON (11/24/10)--The Credit Union National Association (CUNA) has requested that the Federal Reserve Board withdraw an interim final rule that revises several Regulation Z mortgage loan disclosure requirements “as soon as possible” and “impose a general moratorium on the overall Regulation Z rulemaking process that is currently in progress.” While CUNA has always supported reasonable pro-consumer disclosures, the disclosures required under the Fed’s rule “will impose significant burdens on credit unions that will serve only to confuse consumers, without any corresponding benefits,” CUNA said in a comment letter. The Fed changes will implement provisions of the Mortgage Disclosure Improvement Act (MDIA), which was enacted in 2008, and will require lenders to disclose how borrowers’ mortgage payments will change over time so they may be alerted to the risks of payment increases before they consummate the loan. The rule also requires lenders to disclose a statement that there is no guarantee the consumer will be able to refinance the loan to obtain a lower rate and payment. CUNA in the comment letter said that the disclosures required by the rule are duplicative of disclosures that are currently required under the Real Estate Settlement Procedures Act (RESPA), and would likely need to be changed again in the near future. Specifically, the recently enacted Dodd-Frank Act will soon require RESPA disclosures to be combined with the Truth in Lending Act (TILA) disclosures. Though CUNA has advocated that the Fed withdraw the rules entirely, CUNA has also proposed changes to the rule if it remains set to come into effect. The compliance burdens associated with the Fed’s current plan to provide borrowers with an estimate of the maximum mortgage rate during the first five years of their loan would not provide any great benefit to consumers. Instead, CUNA has proposed that the Fed require financial institutions to provide these disclosures at the time that the mortgage is first adjusted. CUNA has also asked the Fed to provide additional guidance on proposed escrow payment disclosures, and has asked the Fed to delay the current Jan. 30, 2011 effective date if the rule is not removed altogether. The full comment letter is available as a link below.