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NCUA CU risk concentration regs out next year--Matz

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WASHINGTON (12/10/10)--The National Credit Union Administration (NCUA) is developing new regulations on natural person credit union risk concentrations, and those regulations will be released during the first quarter of 2011, NCUA Chairman Debbie Matz said during a Thursday Senate hearing. Matz added that the agency is currently drafting revisions to some due diligence standards, and may need to enhance its own Office of Capital Markets to deal with credit ratings issues. However, any action related to its Office of Capital Markets is not pending, Matz said.
Click to view larger image NCUA Chairman Debbie Matz, right, speaks with Sen. Tim Johnson (D-S.D.) ahead of Thursday's hearing on the state of the credit union industry. Matz covered the corporate credit union crisis, the NCUA's response to that crisis, and legislative priorities for credit unions during her testimony. (Photo provided by NCUA)
Matz on Thursday spoke before the Senate Banking Committee during a hearing on the status of the credit union industry. Matz was the sole witness during the hearing. A recent NCUA Office of the Inspector General report that concluded that more aggressive NCUA supervisory actions could have helped the NCUA avoid several credit union failures and prevented the National Credit Union Share Insurance Fund (NCUSIF) from taking on substantial losses was also discussed during the hearing. Matz told Sen. Richard Shelby (R-Ala.) that the NCUA has responded to the report, which was released late last month, by altering its communication strategy with potentially troubled credit unions. Rather than issuing repeated low level warnings to these credit unions, the agency will take more serious action if a given credit union has not responded to an NCUA warning within 90 to 120 days, Matz said. In prepared testimony submitted before the hearing, the NCUA requested that Congress amend the Federal Credit Union Act by changing the net worth definition to allow certain NCUA-established loans and accounts to count as net worth. The FCU Act could also be changed to clarify that the NCUSIF equity ratio is based on NCUSIF-only, unconsolidated financial statements, the NCUA added. The NCUA also suggested that the NCUSIF itself could also be streamlined by giving the agency the option of making premium assessments on federally backed credit unions in advance of anticipated expenditures, a move that the NCUA said could avoid the need to borrow from the U.S. Treasury. The NCUA also detailed its anticipated requests for the upcoming 112th Congress. One priority, according to the NCUA’s testimony, will be extending the statute of limitations for actions that the NCUA makes as conservator or liquidating agent of a credit union. The agency will also pursue the authority to perform its own examinations of third-party vendors that provide services to NCUSIF-backed credit unions, and noted in the release that the current vendor arrangement, which limits the NCUA’s authority, “presents risks such as threats to credit risk, security of systems, availability and integrity of systems, and confidentiality of information.” For the full NCUA release, use the resource link.

Matz backs MBL cap-lift during Thursday hearing

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WASHINGTON (12/10/10)—National Credit Union Administration (NCUA) Chairman Debbie Matz on Thursday backed increasing the member business lending cap for credit unions, saying that business lending, when done properly, is an important tool for credit unions and their members. Matz spoke during a Thursday Senate Banking Committee hearing on the state of the credit union industry. Matz was the sole witness during the hearing. Responding to questions from Sen. Richard Shelby (R-Ala.), Matz said that while some credit unions have had issues due to their business lending practices, the number of credit unions that have experienced these problems is small. Legislation that would lift the current MBL cap from 12.25% of total assets to 27.5% of total assets is currently active in Congress. Matz said that the NCUA would follow this legislation, once passed, with “rigorous regulations” to fight against any additional risks. Rather than opening the “flood gates” right away, Matz said that the NCUA would force many credit unions to start out with low levels of loans before they are permitted to increase the size of their MBL portfolios. The Credit Union National Association (CUNA) continues to look for an appropriate vehicle for Sen. Mark Udall’s pro-MBL cap lift legislation during this or the next Congress. Udall’s MBL legislation, if approved, would lift the MBL cap to 27.5% of assets, a move that CUNA has said would inject up to $10 billion in new, non-taxpayer-backed funds into the economy, creating as many as 100,000 new jobs.

Bachus introduces House finance subcommittee leadership

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WASHINGTON (12/10/10) --Incoming House Financial Services Committee Chair Rep. Spencer Bachus (R-Ala.) on Thursday announced his committee leadership appointees for the 112th Congress. Rep. Jeb Hensarling (R-Texas) will serve as Bachus’s Financial Services Committee vice chair, according to a Thursday release. Bachus also announced slight modifications to various subcommittee jurisdictions. Rep. Judy Biggert (R-Ill.) will chair the subcommittee on insurance, housing and community opportunity. That subcommittee’s jurisdiction will cover insurance, housing, and urban development, and oversight of the U.S. Department of Housing and Urban Development. The financial institutions and consumer credit subcommittee will be chaired by Rep. Shelley Moore Capito (R-W. Va.) and will cover financial institutions, federal deposit insurance, and safety and soundness. Reps. Scott Garrett (R-N.J.) and Ron Paul (R-Texas) will chair the capital markets and government-sponsored enterprises (GSEs) and the domestic monetary policy subcommittees, respectively. Rep. Gary Miller (R-Calif.) will chair the international monetary policy subcommittee, while Rep. Randy Neugebauer (R-Texas) will chair the oversight and investigations subcommittee. Bachus in a statement said that the committee appointees would honor their “commitment to aggressive oversight, reform of the GSEs, and monitoring the implementation of the Dodd-Frank Act. “We are ready to hit the ground running, and I look forward to continuing our work in the next Congress,” Bachus added.

Merger conversion rules on NCUAs final 2010 agenda

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ALEXANDRIA, Va. (12/10/10)—A final rule addressing credit union mergers and conversions, as well as fiduciary duties and indemnification of credit union directors, highlights the final National Credit Union Administration (NCUA) meeting of 2010. The meeting is scheduled for 10 a.m. ET on Dec. 16. The NCUA’s final rule follows an earlier proposal that addressed parts 701, 708a and 708b of the NCUA's Rules and Regulations. The Credit Union National Association in September commented on the proposal, urging the NCUA not to limit credit unions’ ability to make payments to an institution-affiliated party (IAP) to compensate them for any legal costs they have incurred in connection with administrative or legal proceedings by NCUA or a state regulator if the IAP was assessed a money penalty, removed from office, or the subject of a cease and desist order. Potential amendments to the NCUA’s low income definition and rules that address the accuracy of advertising and insurance status notices will also be discussed during the meeting. A proposed rule addressing Part 745 of the NCUA's rules and regulations, Share Insurance, Non-interest-bearing Transaction Accounts, will also be up for consideration. The NCUA will discuss Tri-State FCU's appeal of a previously denied field of membership expansion request, and will cover a change to the overhead reimbursement practices of its Central Liquidity Facility. The NCUA’s monthly report on the status of its insurance funds will also be delivered during the meeting. A closed NCUA session will take place on Friday, Dec. 17. The agenda for that meeting had not been released at press time. For the full NCUA meeting schedule, use the resource link.

Inside Washington (12/09/2010)

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* WASHINGTON (12/10/10)--The Federal Deposit Insurance Corp. scheduled a board meeting for 10 a.m. Tuesday to discuss the designated reserve ratio of the Deposit Insurance Fund (DIF), as well as risk-based capital rules and the 2011 corporate operating budget (American Banker Dec. 9). The board may adopt a 2% DIF target, which is the ratio of reserves to deposits. In October, the FDIC said it is not expected to reach the DIF target ratio, which is used to guide long-term funding, before 2027 … * WASHINGTON (12/10/10)--Dwight Fettig, formerly a senior aide to Sen. Tim Johnson (D-S.D.) will return to Johnson’s office to work as a senior policy adviser (American Banker Dec. 9). Johnson is slated to be the Senate Banking Committee chairman next year. Fettig is expected to be named the committee’s staff director. He served as legislative director for Johnson from 1997 to 2003, and from 1995 to 1996 when Johnson was in the House of Representatives. Fettig was most recently a partner with the law firm of Porterfield, Lowenthal & Fettig, LLC, Washington, D.C. He also has served as senior policy and legislative advisor at Arnold & Porter LLP and senior director of government and industry relations at Freddie Mac … * WASHINGTON (12/10/10)--President Barack Obama’s proposal to extend Bush-era tax breaks includes a tax cut for most Americans, but six million federal, state and local government employees would be excluded from that benefit (The New York Times Dec. 9). The Obama plan would end the Making Work Pay tax credit of $400 for workers with low and middle incomes. Instead, people of all incomes would see a 2% decrease in the payroll tax for Social Security. But government employees do not pay into Social Security. Instead they pay into public pension systems. Under the Obama proposal, government employees stand to lose the $400 tax cut, while not gaining the benefit of the payroll tax cut. More than 174 million workers paid into the Social Security in 2007, but about 5.7 million state and government employees contributed to alternative pension systems …