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Washington Archive

Washington

CUs get accounting guidance for corporate plan costs

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WASHINGTON (3/11/09)—The American Institute of Certified Public Accountants (AICPA) yesterday issued guidance on how credit unions may account for costs associated with the National Credit Union Administration’s (NCUA) Corporate Stabilization Plan. On Jan. 28, the NCUA announced a $1 billion capital infusion for U.S. Central FCU, and a deposit guarantee on uninsured shares at all corporates through February. For those corporates signing a supervisory agreement with the NCUA, it would continue the deposit guarantees through 2010. The agency’s initial estimate of the insurance liability as a result of the guarantee was $3.7 billion, based on corporate credit unions' holdings in impaired asset-backed securities. As a result, the NCUA announced that credit unions would be required to replenish .51% of their National Credit Union Share Insurance Fund (NCUSIF) deposit and pay a premium to bring the NCUSIF's equity level back to 1.3%. The good news in the AICPA opinion comes regarding credit union treatment of the replenishment of the 1% deposit and premium costs associated with the agency’s corporate stabilization efforts. The AICPA is providing flexibility on how to report both the impairment and the premium costs by offering different accounting approaches and no clear directive favoring one over the others. AICPA said credit unions have flexibility to work with their accountants and auditors to determine whether it is more appropriate to:
* Adjust their 2008 financial statements to reflect the insurance premium and deposit costs; * Adjust their 2008 statements for the deposit impairment only and report the premium in 2009; or * Reflect the premium and insurance costs on 2009 statements.
The AICPA guidance also provided advice to corporate credit unions with investments in U.S. Central FCU, and natural person credit unions with capital in those corporates. It described how to evaluate whether they need to write down such capital as a result of U.S. Central's other-than-temporarily-impaired (OTTI) charges of $1.2 billion for 2008, announced on Jan. 28. While the AICPA Technical Practice Aid is not an official ruling from the Financial Accounting Standards Board, it is guidance that accountants and practitioners may rely on in advising credit unions and other clients how and when to report financial issues. The Credit Union National Association (CUNA) Accounting Task Fork was among the interested parties that weighed in with the AICPA on the issues addressed in the AICPA aid. CUNA President/CEO Dan Mica sent a summary of these documents to leagues and credit unions last night.

Inside Washington (03/10/2009)

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* WASHINGTON (3/11/09)—Strong and effective regulation and supervision of banks is necessary for reducing systemic risks, but are not sufficient to guard against a future financial meltdown, Federal Reserve Board Chairman Ben Bernanke said in a speech this week. The current financial crisis, called the worst since the 1930s by the Fed chairman, was precipitated in part by failures of government oversight systems and private risk management. Those failures combined to let a flood of foreign money into the United States without ensuring it was prudently invested. The change needed to stave off future disasters, Bernanke said, is a broad reworking of government regulation of the country’s financial system, with an eye toward long-term changes (The New York Times March 10)… * WASHINGTON (3/11/09)—The Obama administration has nominated the following three people to key posts at the U.S. Treasury Department: Alan Krueger for assistant secretary of economic policy; Kim Wallace for assistant secretary for legislative affairs, and; David Cohen for assistant secretary of terrorist financing. Currently, all the nominees are counselors to the Treasury secretary. (American Banker March 10)…

PwC report summary on corporates unveiled

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ALEXANDRIA, Va. 3/11/09-–A PricewaterhouseCoopers LLP (PwC) report summary, with recommendations for stabilization and improvement of the corporate credit union system, was released by the National Credit Union Administration (NCUA) yesterday. The report identifies good practice models from the system as well as outlines proposed actions to address corporate system needs. The NCUA engaged PwC in November 2008 to review NCUA recommendations for realignment of the corporate credit union system. PwC worked with the agency to analyze stabilization and improvement recommendations. The firm also evaluated implementation challenges. Specifically, the report identifies issues and provides observations and recommendations in four areas: liquidity; capital; structure; and, risk management. The NCUA provided a summary, as requested by the Credit Union National Association (CUNA), but called the report “confidential.” CUNA has also requested that the NCUA provide upcoming results of a PIMCO report analyzing corporate credit unions' investments and their potential losses. PIMCO is a leading global investment management firm Regarding the PwC report, the three-member NCUA board issued the following joint statement: “The PricewaterhouseCoopers LLP confidential report followed a thorough analysis and input from all sources with critical knowledge of the corporate credit union system. “The report augments existing information and serves to validate staff evaluations that the board will use, along with comments received from the advance notice of proposed rulemaking, when considering whether to amend its regulation governing corporate credit unions.” Use the resource link below to access the summary.

Bounce protection foreclosures on Fed consumer panel

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WASHINGTON (3/11/09)—The Federal Reserve Board’s Consumer Advisory Council (CAC) has slated home foreclosures and a proposed rule on overdraft services among its discussion topics for its next meeting, March 26. Also on the agenda, according to the March 10 Federal Register, is community stabilization activities. The Consumer Advisory Council was established in 1976 and advises the Fed on its responsibilities under the Consumer Credit Protection Act and on other matters in the area of consumer financial services. Members are appointed by the Board of Governors and serve staggered three-year terms, and the Council meets three times a year. Currently Alan Cameron, president/CEO of the Idaho CU League, is the only credit union representative on the 30-member panel. As time allows, the complete CAC agenda includes discussion of:
* Foreclosures and efforts to prevent them, including the Making Home Affordable program; * Neighborhood and community stabilization strategies and challenges in communities affected by foreclosures, including implementation of the Neighborhood Stabilization Program; * Credit availability for consumers and small businesses; and * The Fed’s proposed rules regarding financial institutions’ overdraft—or “bounce”—protection plans. The proposed amendments to Regulation E, would provide consumers with certain choices relating to the use of overdraft services and the assessment of overdraft fees; and, finally, * Reports by committees and other matters initiated by Council Members.
Parties wishing to submit views to the Council on the above topics may do so by sending written statements to Jennifer Kerslake, Secretary of the Consumer Advisory Council, Division of Consumer and Community Affairs, Board of Governors of the Federal Reserve System, Washington, D.C. 20551.

Overdraft plans Hill and agency updates

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WASHINGTON (3/11/09)—Rep. Carolyn Maloney (D-N.Y.) is asking her House colleagues to support a 2009 version of her legislation intended to afford consumers more protections in financial institution overdraft protection services. The 2009 bill will be similar to Maloney’s Consumer Overdraft Protection Fair Practices Act (H.R. 946), which was introduced in 2007 but died with the closing session of the last Congress as it failed to get a House vote. That bill would have: ensured that consumers opt-in to potentially costly overdraft protections, rather than being forced into them without notification; required that consumers are alerted when they about to overdraw from their account at ATMs; and required that financial institutions provide full, written disclosure of their overdraft policies to customers or members. The Credit Union National Association (CUNA) staunchly backed the bill’s intention to eliminate abusive practices associated with some overdraft, or bounce, protection plans. However, CUNA opposed the bill's approach of classifying overdraft protection programs under the Truth in Lending Act, and including the service fee associated with overdraft protection programs as a finance charge included in an APR calculation. That approach, CUNA warned, could prevent credit unions from offering overdraft protection plans for fear of exceeding the 18% lending ceiling that applies to federal credit unions. CUNA also had criticized some operational aspects of the bill. CUNA continues to work with key Hill staff and committee members on the overdraft issue and believes Maloney’s bill this year will be pared down from its earlier version. Maloney is a member of the House Financial Services Committee, as well as chairman of the Joint Economic Committee. On the regulatory side, in December 2008, the National Credit Union Administration (NCUA) had proposed, in conjunction with the Federal Reserve Board and Office of Thrift Supervision, a couple of revisions affecting overdraft protections. They would have addressed such things as members' opt-out rights, disclosures and overdrafts due to debit holds. The overdraft plan was issued along with credit card reforms. However, when the Fed voted on its card reforms, it stripped out the overdraft language and issued a revised proposal. Comments are due March 30. The NCUA has said it would take no further action on the overdraft proposal because, if adopted, the Fed plan would cover the activities of federal credit unions. In a related story, the Fed Consumer Advisory Council, meeting March 26, has scheduled discussion on the overdraft proposed rules as one of its agenda items (see related story: 'Bounce’ protection, foreclosures on Fed consumer panel list). Use the resource link below to access CUNA’s comment call on the overdraft proposal.

Senate wraps up appropriations bill

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WASHINGTON (3/11/09)—The Senate completed its work last night on H.R. 1105, the ominibus spending bill. Important to credit unions, the legislation includes language that removes a cap on the Central Liquidity Facility lending authority through Sept. 30. The $410 billion spending bill is meant to fund most of the federal government for the remainder of the year after. Unable to complete consideration of the appropriations bill last week, the U.S. Congress passed a continuing resolution through March 11 to keep the government going. The final legislation gives the CLF continued authority to borrow up to 12 times its capital and surplus, a formula that roughly equals $41 billion that could be borrowed to meet credit union liquidity needs. The bill also includes a $1 million appropriation for technical assistance grants by the Community Development Revolving Loan Fund through FY 2010. The spending package now goes to the White House to await President Barack Obama’s signature.

CUNA opposes new bill with CRA for CUs

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WASHINGTON (3/11/09)-- Rep. Eddie Bernice Johnson is poised to introduce legislation that would, in part, apply Community Reinvestment Act (CRA) requirements on credit unions. The Credit Union National Association (CUNA) strongly opposes legislation extending CRA requirements to credit unions Johnson is scheduled to unveil her bill, called the Community Reinvestment Act Modernization Act of 2009, at a press conference tomorrow. The Texas Democrat has said her bill is intended to promote responsible lending and increased financial access to traditionally underserved communities. CUNA Senior Vice President of Legislative Affairs John Magill said Tuesday such legislation is “a solution in search of a problem.” “CRA was enacted because banks were redlining—drawing circles around communities to which they would not lend,” Magill said. “All available data suggests that credit unions, on the other hand, are out there lending to their members—even and especially in these tough times.” “Credit unions are -- and should be -- focused on meeting the needs of their members. This legislation would be a distraction from the good work credit unions do day in and day out,” Magill warned. “Credit unions should be applauded for the work they are doing—not burdened with unnecessary reporting requirements,” he added.